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MONOPSONY POWER IN MULTIPLE INPUT MARKETS: A Nonparametric Approach

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  • Raper, Kellie Curry
  • Love, H. Alan
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    Abstract

    Cigarette manufacturers' monopsony power exertion in procuring domestic and imported tobacco is investigated using nonparametric methods. While it is often assumed that tobacco program rents are captured by growers, results indicate the opposite actually occurs. Cigarette manufacturers appear to exert significant monopsony power in the domestic leaf tobacco market and capture a large portion of program rents. Cigarette manufacturers appear to exert monopsony power of much smaller magnitude in the international leaf tobacco market, but with increasing magnitude in more recent years.

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    File URL: http://purl.umn.edu/11656
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    Bibliographic Info

    Paper provided by Michigan State University, Department of Agricultural, Food, and Resource Economics in its series Staff Papers with number 11656.

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    Date of creation: 1999
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    Handle: RePEc:ags:midasp:11656

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    Postal: Justin S. Morrill Hall of Agriculture, 446 West Circle Dr., Rm 202, East Lansing, MI 48824-1039
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    Web page: http://www.aec.msu.edu/agecon/
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    Related research

    Keywords: market power; tobacco; nonparametric; monopsony; imports.; International Relations/Trade; L1;

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    1. Lilyan E. Fulginiti & Richard K. Perrin, 1992. "Theory and Measurement of Producer Response under Quotas, The," Food and Agricultural Policy Research Institute (FAPRI) Publications 92-wp94, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    2. Lambert, David K., 1994. "Technological Change In Meat And Poultry-Packing And Processing," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 26(02), December.
    3. James A. Chalfant & Bin Zhang, 1997. "Variations on Invariance or Some Unpleasant Nonparametric Arithmetic," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1164-1176.
    4. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
    5. Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-19, October.
    6. Sullivan, Daniel, 1985. "Testing Hypotheses about Firm Behavior in the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 586-98, June.
    7. Fulginiti, Lilyan & Perrin, Richard, 1993. "The Theory and Measurement of Producer Response under Quotas," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 97-106, February.
    8. Ashenfelter, Orley & Sullivan, Daniel, 1987. "Nonparametric Tests of Market Structure: An Application to the Cigarette Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 483-98, June.
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