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Milking the Milkers: a Study on Buyer Power in the Dairy Market of Peru

Author

Listed:
  • José A. Tavera

    (Departamento de Economía de la Pontificia Universidad Católica del Perú)

  • Tilsa Oré Mónago

Abstract

The literature on imperfect competition suggests the existence of two conditions facilitating the exercise of buyer market power: the existence of an inelastic and upward-sloping supply, and the existence of high concentration in purchases. In this study, we use monthly aggregate data (from 1999-2014) of the raw milk market in Peru. We test whether those conditions hold, by analyzing the market and estimating the supply elasticity. Our findings suggest the existence of buyer power in raw milk market since an inelastic raw milk supply and a highly concentrated market is verified. Our assessment is reinforced with the role played by the existing market power of the firms at the downstream segment and the existence of entry barriers in that market segment. JEL Classification-JEL: L11, L12, L13, L41, L42

Suggested Citation

  • José A. Tavera & Tilsa Oré Mónago, 2018. "Milking the Milkers: a Study on Buyer Power in the Dairy Market of Peru," Documentos de Trabajo / Working Papers 2018-470, Departamento de Economía - Pontificia Universidad Católica del Perú.
    • Handle: RePEc:pcp:pucwps:wp00470
    DOI: 10.18800/2079-8474.0470
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    References listed on IDEAS

    as
    1. Inderst, Roman & Wey, Christian, 2007. "Buyer power and supplier incentives," European Economic Review, Elsevier, vol. 51(3), pages 647-667, April.
    2. Bonnet, Céline & Dubois, Pierre, 2010. "Non Linear Contracting and Endogenous Buyer Power between Manufacturers and Retailers: Empirical Evidence on Food Retailing in France," IDEI Working Papers 638, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. Claire Chambolle & Sofia Villas-Boas, 2007. "Buyer Power through Producer's Differentiation," Working Papers hal-00243058, HAL.
    4. Christopher M. Snyder, 1996. "A Dynamic Theory of Countervailing Power," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 747-769, Winter.
    5. Inderst, Roman & Wey, Christian, 2003. "Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 1-19, Spring.
    6. Smith, Howard & Thanassoulis, John, 2006. "Upstream Competition and Downstream Buyer Power," CEPR Discussion Papers 5803, C.E.P.R. Discussion Papers.
    7. Roger G. Noll, 2005. ""Buyer Power" and Economic Policy," Discussion Papers 04-008, Stanford Institute for Economic Policy Research.
    8. Tasneem Chipty & Christopher M. Snyder, 1999. "The Role Of Firm Size In Bilateral Bargaining: A Study Of The Cable Television Industry," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 326-340, May.
    9. Paul Dobson & Roger Clarke & Stephen Davies & Michael Waterson, 2001. "Buyer Power and its Impact on Competition in the Food Retail Distribution Sector of the European Union," Journal of Industry, Competition and Trade, Springer, vol. 1(3), pages 247-281, September.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Milk Demand; Dairy Industry; Evaporated Milk; Raw Milk; Monempory; Monopsony; Milk Supply; Buyer Power;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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