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Buyer Power in U.K. Food Retailing: A 'First-Pass' Test

Author

Listed:
  • Lloyd Tim

    (University of Nottingham)

  • McCorriston Steve

    (University of Exeter)

  • Morgan Wyn

    (University of Nottingham)

  • Rayner Anthony

    (University of Nottingham)

  • Weldegebriel Habtu

    (University of Warwick)

Abstract

The potential existence of buyer power in U.K. food retailing has attracted the scrutiny of the U.K.'s anti-trust authorities, culminating in the second of two comprehensive regulatory inquiries in recent years. Such inquiries are authoritative but correspondingly time-consuming and costly. Moreover, detection of buyer power has been dogged by the paucity of reliable evidence of its existence. In this paper, we present a simple theoretical model of oligopsony which delivers quasi-reduced form retailer-producer pricing equations with which the null of perfect competition can be tested using readily available market data. Using a cointegrated vector autoregression, we find empirical results that show the null of perfect competition can be rejected in seven of the nine food products investigated. Though not conclusive on the existence of buyer power, the proposed test offers a means via which the behaviour of the retail-producer price spread is consistent with it. At the very least, it can corroborate the concerns of the anti-trust authorities as to whether buyer power is potentially one source of concern.

Suggested Citation

  • Lloyd Tim & McCorriston Steve & Morgan Wyn & Rayner Anthony & Weldegebriel Habtu, 2009. "Buyer Power in U.K. Food Retailing: A 'First-Pass' Test," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 7(1), pages 1-40, May.
    • Handle: RePEc:bpj:bjafio:v:7:y:2009:i:1:n:5
    DOI: 10.2202/1542-0485.1253
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    Citations

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    Cited by:

    1. Roberto Furesi & Fabio A. Madau & Pietro Pulina, 2013. "Potere della distribuzione moderna nelle filiere agroalimentari: il caso dell?olio d?oliva in Italia," Economia agro-alimentare, FrancoAngeli Editore, vol. 15(1), pages 123-143.
    2. Anthony N. Rezitis, 2018. "Empirical analysis of price relations along the Finnish supply chain of selected meat, dairy, and egg products: A dynamic panel data approach," Agribusiness, John Wiley & Sons, Ltd., vol. 34(3), pages 542-561, June.
    3. Octavio Fernández-Amador & Josef Baumgartner & Jesús Crespo-Cuaresma, 2010. "Milking The Prices: The Role of Asymmetries in the Price Transmission Mechanism for Milk Products in Austria," Working Papers 2010-21, Faculty of Economics and Statistics, Universität Innsbruck.
    4. Daniele Cavicchioli & Luca Cacchiarelli & Alessandro Sorrentino & Roberto Pretolani, 2022. "Should We Cry over the Spilt Milk? Market Power and Structural Change along Dairy Supply Chains in EU Countries," Sustainability, MDPI, vol. 14(8), pages 1-18, April.
    5. Tian Xia & Brian Sancewich, 2018. "Interaction between buyer power in agricultural procurement and seller power in food retailing, and optimal allocation of anti-trust efforts," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 6(1), pages 1-19, December.
    6. Daniele Cavicchioli, 2018. "Detecting Market Power Along Food Supply Chains: Evidence and Methodological Insights from the Fluid Milk Sector in Italy," Agriculture, MDPI, vol. 8(12), pages 1-22, December.
    7. Lindström, Hanna, 2021. "Price transmission for organic and conventional milk products in Sweden," Umeå Economic Studies 999, Umeå University, Department of Economics.
    8. Tim Lloyd, 2017. "Forty Years of Price Transmission Research in the Food Industry: Insights, Challenges and Prospects," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(1), pages 3-21, February.
    9. Johan F.M. Swinnen & Anneleen Vandeplas, 2010. "Market power and rents in global supply chains," Agricultural Economics, International Association of Agricultural Economists, vol. 41(s1), pages 109-120, November.
    10. Omid Zamani & Thomas Bittmann & Jens‐Peter Loy, 2019. "Demand peaks and cost pass‐through: The case of Iran's poultry market," Agribusiness, John Wiley & Sons, Ltd., vol. 35(4), pages 657-674, October.
    11. Daniele Curzi & Maria Garrone & Alessandro Olper, 2021. "Import Competition and Firm Markups in the Food Industry," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(4), pages 1433-1453, August.
    12. A. Ford Ramsey & Barry K. Goodwin & William F. Hahn & Matthew T. Holt, 2021. "Impacts of COVID‐19 and Price Transmission in U.S. Meat Markets," Agricultural Economics, International Association of Agricultural Economists, vol. 52(3), pages 441-458, May.
    13. Lindström, Hanna, 2021. "Price transmission for organic and conventional milk products in Sweden," HFI Working Papers 22, Institute of Retail Economics (Handelns Forskningsinstitut).
    14. Daniele CAVICCHIOLI, 2013. "Detecting market power along food supply chains: evidence from the fluid milk sector in Italy," Departmental Working Papers 2013-01, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano, revised 30 Jan 2013.

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