The Tradeoff Between Oligopsony Power and Cost Efficiency in Horizontal Consolidation: An Example from Beef Packing
AbstractIn this paper we model the tradeoff between regional oligopsony power and cost efficiency resulting from consolidation in a food processing industry. The model can be used to calculate the cost reductions necessary to offset the anticompetitive effects of market power and to compare them to actual cost savings achieved through plant scale or multiplant operating economies. For an application, we choose the beef packing industry. For this case, we find that the estimated cost savings necessary to neutralize the anticompetitive effects of consolidation in beef packing are about half the actual cost savings from scale economies.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 5062.
Date of creation: 01 Nov 1995
Date of revision:
Publication status: Published in American Journal of Agricultural Economics, November 1995, vol. 77 no. 4, pp. 825-836
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Web page: http://www.econ.iastate.edu
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