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Imperfect Competition in the Italian Dairy Chain: Consequences for the Price Transmission and Welfare Distribution

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  • Rosa, Franco
  • Vasciaveo, Michaela

Abstract

The milk quotas were introduced in Italy in 1984; from that time onward, the dairy chain has progressed in technology and organization with consequences for the market competition. The Aglink-Cosimo simulations suggest milk production will return to an increasing path, driven by a fairly optimistic demand outlook for the improved macroeconomic 2020 future prospects in the EU-27 economies and milk production will exceed the present level by about 3%. Milk deliveries would be expected to increase in Italy by a slightly higher rate, according with the consumption trend of dairy products. Purpose of this paper is to analyze the consequences of structural adjustments of the dairy chain for the competitive price setting assuming the retailers and processors having the control on the market prices, causing changes on the welfare distribution. The analysis is based on derived demand and price-transmission equations, using a successive oligopoly model. The conjectural hypothesis about the players provides the framework for estimating the degrees of price transmission in a dynamic setting with agents at the industry and retail levels (rather than firm) are acting as two oligopoly players. The conjectures about the oligopoly depending on the structure (number of competitors, size and degree of collusion), across the vertical stages of the dairy chain allow to simulate different degrees of market imperfection reflected on the price transmission and welfare distribution. (Dhar and Cotterill, 2000; McCorriston and Scheldon, 96; Morgan and Rayner, 1988). Six simulations for price transmission and ten simulations for welfare distribution are performed assuming different collusive patterns and results are used to check for the market efficiency hypothesis.

Suggested Citation

  • Rosa, Franco & Vasciaveo, Michaela, 2013. "Imperfect Competition in the Italian Dairy Chain: Consequences for the Price Transmission and Welfare Distribution," 2013 International European Forum, February 18-22, 2013, Innsbruck-Igls, Austria 164747, International European Forum on System Dynamics and Innovation in Food Networks.
    • Handle: RePEc:ags:iefi13:164747
    DOI: 10.22004/ag.econ.164747
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    References listed on IDEAS

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    Cited by:

    1. Franscarelli, Angelo & Ciliberti, Stefano, 2014. "Mandatory Rules In Contracts Of Sale Of Food And Agricultural Products In Italy: An Assessment Of Article 62 Of Law 27/2012," 140th Seminar, December 13-15, 2013, Perugia, Italy 163350, European Association of Agricultural Economists.
    2. Stefano Ciliberti & Angelo Frascarelli, 2014. "L?obbligo dei contratti di cessione dei prodotti agricoli e alimentari: una valutazione degli effetti dell?articolo 62 della legge n. 27/2012," Economia agro-alimentare, FrancoAngeli Editore, vol. 16(1), pages 37-61.

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    Agribusiness; Farm Management; Research Methods/ Statistical Methods;
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