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Buyer Power in U.K. Food Retailing: A 'First-Pass' Test

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Author Info

  • Lloyd Tim

    (University of Nottingham)

  • McCorriston Steve

    (University of Exeter)

  • Morgan Wyn

    (University of Nottingham)

  • Rayner Anthony

    (University of Nottingham)

  • Weldegebriel Habtu

    (University of Warwick)

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    Abstract

    The potential existence of buyer power in U.K. food retailing has attracted the scrutiny of the U.K.'s anti-trust authorities, culminating in the second of two comprehensive regulatory inquiries in recent years. Such inquiries are authoritative but correspondingly time-consuming and costly. Moreover, detection of buyer power has been dogged by the paucity of reliable evidence of its existence. In this paper, we present a simple theoretical model of oligopsony which delivers quasi-reduced form retailer-producer pricing equations with which the null of perfect competition can be tested using readily available market data. Using a cointegrated vector autoregression, we find empirical results that show the null of perfect competition can be rejected in seven of the nine food products investigated. Though not conclusive on the existence of buyer power, the proposed test offers a means via which the behaviour of the retail-producer price spread is consistent with it. At the very least, it can corroborate the concerns of the anti-trust authorities as to whether buyer power is potentially one source of concern.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.

    Volume (Year): 7 (2009)
    Issue (Month): 1 (May)
    Pages: 1-40

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    Handle: RePEc:bpj:bjafio:v:7:y:2009:i:1:n:5

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/jafio

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    Cited by:
    1. Octavio Fernández Amador & Josef Baumgartner & Jesús Crespo Cuaresma, . "Milking the Prices: The Role of Asymmetries in the Price Transmission Mechanism for Milk Products in Austria," WIFO Working Papers 378, WIFO.

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