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The Effect of Farm Supply Shifts on Concentration and Market Power in the Food Processing Sector

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  • Stephen F. Hamilton
  • David L. Sunding

Abstract

In this paper we examine the marginal impact of changing farm supply on the market structure of the downstream food processing sector. We develop a theoretical model that allows for cost differences among processors and endogenizes downstream entry and exit. Comparative statics results are consistent with several well-established trends in the food processing sector. In particular, the analysis demonstrates that increasing concentration in the food processing sector is consistent with decreasing market power. Indeed, we find that when the farm supply curve shifts outward, an increase in concentration can only occur when there is a decrease in market power. Copyright 1997, Oxford University Press.

Suggested Citation

  • Stephen F. Hamilton & David L. Sunding, 1997. "The Effect of Farm Supply Shifts on Concentration and Market Power in the Food Processing Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 524-531.
  • Handle: RePEc:oup:ajagec:v:79:y:1997:i:2:p:524-531
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    File URL: http://hdl.handle.net/10.2307/1244149
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    Cited by:

    1. Philippe Bontems & Nicolas Gruyer, 2007. "When cost improvements harm consumers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(1), pages 63-79, February.
    2. Bontems, Philippe & Bouamra-Mechemache, Zohra, 2003. "Predatory Accommodation In Vertical Contracting With Externalities," 2003 Annual meeting, July 27-30, Montreal, Canada 22044, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Alexandre Gohin & Hervé Guyomard, 2000. "Measuring Market Power for Food Retail Activities: French Evidence," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(2), pages 181-195.
    4. Nene, Gibson & Azzam, Azzeddine M. & Schoengold, Karina, 2009. "Environmental Regulations and the Structure of U.S. Hog Farms," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49395, Agricultural and Applied Economics Association.
    5. Hudson, Darren, 1998. "Intra-Processor Price-Spread Behavior: Is The U.S. Catfish Processing Industry Competitive?," Journal of Food Distribution Research, Food Distribution Research Society, vol. 29(2), July.
    6. Muhammad AFZAL & Maryam AYAZ, 2013. "Efficiency of Food Sector of Pakistan-A Dea Analysis," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(10), pages 1310-1330, October.
    7. João Ricardo Faria & Franklin G. Mixon, 2016. "Farmer-Entrepreneurs, Agricultural Innovation, and Explosive Research and Development Cycles," Administrative Sciences, MDPI, Open Access Journal, vol. 6(4), pages 1-11, September.

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