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Inventory Constraints in a Dynamic Model of Imperfect Competition: An Application to Beef Packing

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  • Hunnicutt Lynn

    (Department of Economics, Utah State University, Logan, Utah, USA)

  • Aadland David

    (Department of Economics, Utah State University, Logan, Utah, USA)

Abstract

This paper incorporates inventory dynamics into a standard conjectural variations analysis of market power. Using a model which incorporates closed-loop equilibrium strategies, we show that measures of market power that ignore inventory dynamics are biased. We then apply the model to the beef-packing industry using annual data on cattle stocks, slaughter and prices from 1933-1999. Our estimates suggest that static measures overestimate the amount of market power exerted by beef-packing firms.

Suggested Citation

  • Hunnicutt Lynn & Aadland David, 2003. "Inventory Constraints in a Dynamic Model of Imperfect Competition: An Application to Beef Packing," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 1(1), pages 1-24, March.
    • Handle: RePEc:bpj:bjafio:v:1:y:2003:i:1:n:12
    DOI: 10.2202/1542-0485.1023
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    2. Sheldon, Ian M., 2017. "The Competitiveness Of Agricultural Product And Input Markets: A Review And Synthesis Of Recent Research," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 49(1), pages 1-44, February.
    3. Dimitrios Panagiotou & Athanassios Stavrakoudis, 2017. "A Stochastic Production Frontier Estimator of the Degree of Oligopsony Power in the U.S. Cattle Industry," Journal of Industry, Competition and Trade, Springer, vol. 17(1), pages 121-133, March.
    4. Ani L. Katchova & Ian M. Sheldon & Mario J. Miranda, 2005. "A dynamic model of oligopoly and oligopsony in the U.S. potato-processing industry," Agribusiness, John Wiley & Sons, Ltd., vol. 21(3), pages 409-428.

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