Price Transmission, Market Power and Returns to Scale
AbstractIn this paper, we aim to model the vertical relation between retailers and suppliers in the food industry whereby retailers exercise seller power in their relation with consumers and buyer power in their relation with producers. We then evaluate the degree of price transmission, relative to the perfectly competitive benchmark, from the farm to the retail sector assuming a supply shock. With the view to evaluating the impact of market power's interaction with industry technology on the degree of price transmission, we assume industry technology to be characterised by variable input proportions and non-constant returns to scale. Our model predicts that, relative to that which obtains when markets are perfectly competitive and industry technology is characterised by constant returns to scale, the degree of price transmission when market power and industry technology interact cannot be unambiguously determined.
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Bibliographic InfoPaper provided by Scottish Agricultural College, Land Economy Research Group in its series Working Papers with number 46004.
Date of creation: Dec 2006
Date of revision:
price transmission; returns to scale; market power; Demand and Price Analysis; Marketing; L11; Q13;
Other versions of this item:
- Wang, Xiuqing & Weldegebriel, Habtu T. & Rayner, Anthony J., 2006. "Price Transmission, Market Power and Returns to Scale," Working Papers 46004, Scotland's Rural College (formerly Scottish Agricultural College), Land Economy & Environment Research Group.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
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