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Meat-Packer Conduct In Fed Cattle Pricing: Multiple-Market Oligopsony Power

  • Koontz, Stephen R.
  • Garcia, Philip
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    The exercise of market power across multiple geographic fed cattle markets is measured with an econometric model which links behavior of the margin between boxed beef and regional fed cattle prices to an oligopsony model of multiple-market conduct. The game theoretic economic model suggests that for market power to be exercised in a single market a discontinuous pricing strategy must be followed. Total market power is enhance if meat-packers coordinate this pricing strategy across geographic markets. Tests reject independence of pricing conduct across geographic markets which suggests multiple-market power is present. The extent of the market power also is consistent with the economic model. More market power is exercised across regions with the same meat-packing firms. However, the magnitude of the market power is small and decreased between the early and late 1980s.

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    File URL: http://purl.umn.edu/31015
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    Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

    Volume (Year): 22 (1997)
    Issue (Month): 01 (July)
    Pages:

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    Handle: RePEc:ags:jlaare:31015
    Contact details of provider: Web page: http://waeaonline.org/
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    1. Azzam, Azzeddine M. & Schroeter, John R., 1991. "Implications Of Increased Regional Concentration And Oligopsonistic Coordination In The Beef Packing Industry," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(02), December.
    2. 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.
    3. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    4. Gelfand, Matthew D. & Spiller, Pablo T., 1987. "Entry barriers and multiproduct oligopolies: Do they forebear or spoil?," International Journal of Industrial Organization, Elsevier, vol. 5(1), pages 101-113, March.
    5. Slade, Margaret E, 1986. "Exogeneity Tests of Market Boundaries Applied to Petroleum Products," Journal of Industrial Economics, Wiley Blackwell, vol. 34(3), pages 291-303, March.
    6. Scheffman, David T & Spiller, Pablo T, 1987. "Geographic Market Definition under the U.S. Department of Justice Merger Guidelines," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 123-47, April.
    7. Johnson, D. Gale & Connor, John M. & Josling, Timothy E. & Schmitz, Andrew & Schuh, G. Edward, 1989. "Concentration Issues In The U.S. Beef Subsector," Working Papers 115907, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    8. Hayenga, Marvin L. & O'Brien, Daniel, 1992. "Packer Competition, Forward Contracting Price Impacts, and the Relevant Market for Fed Cattle," Staff General Research Papers 11603, Iowa State University, Department of Economics.
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