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The Effect of Farm Supply Shifts on Concentration and Market Power in the Food Processing Sector


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  • Stephen F. Hamilton
  • David L. Sunding


In this paper we examine the marginal impact of changing farm supply on the market structure of the downstream food processing sector. We develop a theoretical model that allows for cost differences among processors and endogenizes downstream entry and exit. Comparative statics results are consistent with several well-established trends in the food processing sector. In particular, the analysis demonstrates that increasing concentration in the food processing sector is consistent with decreasing market power. Indeed, we find that when the farm supply curve shifts outward, an increase in concentration can only occur when there is a decrease in market power. Copyright 1997, Oxford University Press.

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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 79 (1997)
Issue (Month): 2 ()
Pages: 524-531

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Handle: RePEc:oup:ajagec:v:79:y:1997:i:2:p:524-531

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Cited by:
  1. Bontems, P. & Bouamra-Mechemache, Z., 2004. "Predatory accomodation in vertical contracting with externalities," Economics Working Paper Archive (Toulouse) 200402, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse).
  2. Nicolas Gruyer & Philippe Bontems, 2006. "When cost improvements harm consumers," Economics Working Papers 03, LEEA (air transport economics laboratory), ENAC (french national civil aviation school).
  3. Hudson, Darren, 1998. "Intra-Processor Price-Spread Behavior: Is The U.S. Catfish Processing Industry Competitive?," Journal of Food Distribution Research, Food Distribution Research Society, vol. 29(2), July.
  4. Nene, Gibson & Azzam, Azzeddine M. & Schoengold, Karina, 2009. "Environmental Regulations and the Structure of U.S. Hog Farms," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49395, Agricultural and Applied Economics Association.
  5. Bouamra-Mechemache, Zohra & Jianyu, Yu, 2013. "Production Standards, Competition and Vertical Relationship," TSE Working Papers 13-417, Toulouse School of Economics (TSE).


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