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Foaming up a milk empire? Projected effects of a dairy merger

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  • Syed Badruddoza
  • Jill J. McCluskey
  • Andrea C. Carlson

Abstract

The recent bankruptcy of Dean Foods (DF) and subsequent acquisition of a major share by Dairy Farmers of America (DFA) raised an antitrust complaint which led to DF divesting some assets. The current article empirically analyzes the economic impact of a hypothetical merger between DF and DFA. We use retail scanner data of 2008–2018 under a random‐coefficient discrete choice framework. Assuming a constant marginal cost, we find that the merger may slightly increase retail prices of cow milk products‐‐especially organic ones‐‐across the market and the hypothetical market power of DFA in the long run.

Suggested Citation

  • Syed Badruddoza & Jill J. McCluskey & Andrea C. Carlson, 2022. "Foaming up a milk empire? Projected effects of a dairy merger," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(3), pages 1327-1339, September.
    • Handle: RePEc:wly:apecpp:v:44:y:2022:i:3:p:1327-1339
    DOI: 10.1002/aepp.13207
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    1. Michael F. Sproul, 2009. "Antitrust and Prices," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 84-95, April.
    2. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387.
    3. Robert W. Crandall & Clifford Winston, 2005. "Does antitrust policy improve consumer welfare? Assessing the evidence," Chapters, in: Colin Robinson (ed.), Governments, Competition and Utility Regulation, chapter 2, Edward Elgar Publishing.
    4. MacDonald, James & Newton, Doris, 2014. "Milk Production Continues Shifting to Large-Scale Farms," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, issue 11, pages 1-1, December.
    5. Stewart, Hayden & Dong, Diansheng & Carlson, Andrea, 2013. "Why Are Americans Consuming Less Fluid Milk? A Look at Generational Differences in Intake Frequency," Economic Research Report 262223, United States Department of Agriculture, Economic Research Service.
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