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Market Power and/or Efficiency: An Application to U.S. Food Processing

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Author Info

  • Rigoberto A. Lopez
  • Azzeddine M. Azzam
  • Carmen Liron-Espana

Abstract

This article separates oligopoly-power and cost-efficiency effects of changes in industrial concentration and assesses their impact on output prices in 32 food-processing industries. Empirical results indicate that although concentration induces cost efficiency in one-third of the industries, oligopoly-power effects either dominate cost efficiency or reinforce inefficiency, resulting in higher output prices in most industries. The article also provides fresh econometric estimates of oligopoly power and economies of size for the industries in question.

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File URL: http://fmpc.uconn.edu/publications/rr/rr60.pdf
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Bibliographic Info

Paper provided by University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy in its series Food Marketing Policy Center Research Reports with number 060.

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Date of creation: 2001
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Handle: RePEc:zwi:fpcrep:060

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Postal: 1376 Storrs Road, U-21, Storrs, Connecticut 06269-4021
Phone: 860-486-2836
Fax: 860-486-1932
Web page: http://www.zwickcenter.uconn.edu
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Related research

Keywords: industrial concentration; economies of scale; industrial organization; oligopoly power; food processing; Agribusiness; Industrial Organization; Productivity Analysis; L00; L11; L13; L66;

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  1. Olson, Dennis O. & Shieh, Yeung-Nan, 1989. "Estimating functional forms in cost-prices," European Economic Review, Elsevier, vol. 33(7), pages 1445-1461, September.
  2. Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc.
  3. Schroeter, John R., 1988. "Estimating the Degree of Market Power in the Beef Packing Industry," Staff General Research Papers 11114, Iowa State University, Department of Economics.
  4. Martin, Stephen, 1988. "Market Power and/or Efficiency?," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 331-35, May.
  5. Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
  6. Perry, Martin K, 1984. "Scale Economies, Imperfect Competition, and Public Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 313-33, March.
  7. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
  8. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  9. Sam Peltzman, 1977. "The Gains and Losses From Industrial Concentration," NBER Working Papers 0163, National Bureau of Economic Research, Inc.
  10. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-86, August.
  11. Schroeter, John R. & Azzam, Azzeddine M., 1990. "Measuring Market Power in Multi-Product Oligopolies: The U.S. Meat Industry," Staff General Research Papers 11112, Iowa State University, Department of Economics.
  12. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  13. Azzam, Azzeddine M, 1997. "Measuring Market Power and Cost-Efficiency Effects of Industrial Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 377-86, December.
  14. Bian Lin & Donald McFetridge, 1997. "The efficiencies defence in merger cases: Implications of alternate standards," Carleton Industrial Organization Research Unit (CIORU) 97-03, Carleton University, Department of Economics.
  15. Golan, Amos & Judge, George & Perloff, Jeffrey M, 1996. "Estimating the Size Distribution of Firms Using Government Summary Statistics," Journal of Industrial Economics, Wiley Blackwell, vol. 44(1), pages 69-80, March.
  16. Catherine J. Morrison Paul, 2001. "Cost Economies And Market Power: The Case Of The U.S. Meat Packing Industry," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 531-540, August.
  17. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  18. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 372-75, November.
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