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Meat-Packer Conduct In Fed Cattle Pricing: Multiple-Market Oligopsony Power

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  • Koontz, Stephen R.
  • Garcia, Philip
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    Abstract

    The exercise of market power across multiple geographic fed cattle markets is measured with an econometric model which links behavior of the margin between boxed beef and regional fed cattle prices to an oligopsony model of multiple-market conduct. The game theoretic economic model suggests that for market power to be exercised in a single market a discontinuous pricing strategy must be followed. Total market power is enhance if meat-packers coordinate this pricing strategy across geographic markets. Tests reject independence of pricing conduct across geographic markets which suggests multiple-market power is present. The extent of the market power also is consistent with the economic model. More market power is exercised across regions with the same meat-packing firms. However, the magnitude of the market power is small and decreased between the early and late 1980s.

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    Bibliographic Info

    Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

    Volume (Year): 22 (1997)
    Issue (Month): 01 (July)
    Pages:

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    Handle: RePEc:ags:jlaare:31015

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    Web page: http://waeaonline.org/
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    Keywords: Demand and Price Analysis;

    References

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    1. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
    2. Johnson, D. Gale & Connor, John M. & Josling, Timothy E. & Schmitz, Andrew & Schuh, G. Edward, 1989. "Concentration Issues In The U.S. Beef Subsector," Working Papers 115907, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    3. Scheffman, David T & Spiller, Pablo T, 1987. "Geographic Market Definition under the U.S. Department of Justice Merger Guidelines," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 123-47, April.
    4. Slade, Margaret E, 1986. "Exogeneity Tests of Market Boundaries Applied to Petroleum Products," Journal of Industrial Economics, Wiley Blackwell, vol. 34(3), pages 291-303, March.
    5. Hayenga, Marvin L. & O'Brien, Daniel, 1992. "Packer Competition, Forward Contracting Price Impacts, and the Relevant Market for Fed Cattle," Staff General Research Papers 11603, Iowa State University, Department of Economics.
    6. Gelfand, Matthew D. & Spiller, Pablo T., 1987. "Entry barriers and multiproduct oligopolies: Do they forebear or spoil?," International Journal of Industrial Organization, Elsevier, vol. 5(1), pages 101-113, March.
    7. Schroeter, John R. & Azzam, Azzeddine M., 1991. "Implications of Increased Regional Concentration and Oligopsonistic Coordination in the Beef Packing Industry," Staff General Research Papers 11109, Iowa State University, Department of Economics.
    8. Schroeter, John R. & Azzam, Azzeddine M., 1990. "Measuring Market Power in Multi-Product Oligopolies: The U.S. Meat Industry," Staff General Research Papers 11112, Iowa State University, Department of Economics.
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    Citations

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    Cited by:
    1. Love, H. Alan & Capps, Oral, Jr. & Williams, Gary W., 2009. "Concentration in Beef Packing and Slaughter Cattle Pricing," Reports 90493, Texas A&M University, Agribusiness, Food, and Consumer Economics Research Center.
    2. Jared G. Carlberg & Robert J. Hogan & Clement E. Ward, 2009. "Game theory application to Fed Cattle procurement in an experimental market," Agribusiness, John Wiley & Sons, Ltd., vol. 25(1), pages 56-69.
    3. Cai, Xiaowei & Stiegert, Kyle W. & Koontz, Stephen R., 2009. "Oligopsony Power: Evidence from the U.S. Beef Packing Industry," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49364, Agricultural and Applied Economics Association.
    4. Perekhozhuk, Oleksandr & Grings, Michael & Glauben, Thomas, 2009. "Oligopsony Power in the Ukrainian Milk Processing Industry: Evidence from the Regional Markets for Raw Milk," MPRA Paper 16991, University Library of Munich, Germany.
    5. Tostao, Emilio & Chung, Chanjin & Brorsen, B. Wade, 2006. "Integrating the Structural Auction Approach and Traditional Measures of Market Power," 2006 Annual meeting, July 23-26, Long Beach, CA 21244, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Perekhozhuk Oleksandr & Hockmann Heinrich & Fertő Imre & Bakucs Lajos Zoltán, 2013. "Identification of Market Power in the Hungarian Dairy Industry: A Plant-Level Analysis," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 11(1), pages 1-13, January.
    7. Pritchett, James G. & Liu, Donald J., 1998. "Estimating Backward Integration In A Primary Input Market: The Case Of U.S. Hog Industry," Conference Papers 14480, University of Minnesota, Center for International Food and Agricultural Policy.
    8. Love, H. Alan & Capps, Oral, Jr. & Williams, Gary W., 2010. "Concentration In Beef Packing and Slaughter Cattle Pricing," Journal of Food Distribution Research, Food Distribution Research Society, vol. 41(3), November.
    9. Love, H. Alan & Burton, Diana M., 1999. "A Strategic Rationale For Captive Supplies," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), July.
    10. Azzam, Azzeddine M., 1998. "Competition in the US meatpacking industry: is it history?," Agricultural Economics, Blackwell, vol. 18(2), pages 107-126, March.
    11. Trechter, David D. & McGregor, Murray J. & Murray-Prior, Roy B., 2003. "A Neo-Institutional Assessment of Cooperative Evolution: Comparing the Australian Wheat Board and the Fonterra Dairy Group," 2003 Annual Meeting, October 29 31801, NCERA-194 Research on Cooperatives.
    12. Kalyn T. Coatney & Sherrill L. Shaffer & Dale J. Menkhaus, 2011. "Auction Prices, Market Share, and a Common Agent," CAMA Working Papers 2011-24, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    13. Marsh, John M., 2001. "U.S. Feeder Cattle Prices: Effects Of Finance And Risk, Cow-Calf And Feedlot Technologies, And Mexican Feeder Imports," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(02), December.
    14. Azzam, Azzeddine M., 1998. "Invited Paper: Competition in the US meatpacking industry: is it history?," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 18(2), March.

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