Comment on Top-of-The-Market Contract-Pricing Clauses

Xia and Sexton find anti-competitive effects from contracts between meat-packers and ranchers that require delivery of all of a contracting rancher's cattle to the packer it contracted with at the highest price cattle wind up selling for in the spot market (i.e., the "Top-of-the-Market" price). While XS recommend banning such clauses, this comment shows that the SX model is too unrealistic to support such a conclusion. Since TOMP clauses can provide important benefits to society, and there is no particular reason to think that they are harmful, they should not be banned