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Competition in U.S. Farm Product Markets: Do Long-Run Incentives Trump Short-Run Market Power?

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  • John M. Crespi
  • Tina L. Saitone
  • Richard J. Sexton

Abstract

This article addresses the current status of farm buyer market power. We argue that buyer power concerns are often overstated because traditional models of buyer power are incapable of depicting the economic interactions that are fundamental to modern agricultural markets, where exchange is governed by stable contractual relationships. Exercising short-run oligopsony power is inimical to the long-run interests of buyers in these settings because below-competitive returns will lead to the exodus of resources from input production. Policy proposals grounded in the presumed linkage between concentration, competition, and market power may well be misguided and detrimental to the objectives that proponents seek to advance. Copyright 2012, Oxford University Press.

Suggested Citation

  • John M. Crespi & Tina L. Saitone & Richard J. Sexton, 2012. "Competition in U.S. Farm Product Markets: Do Long-Run Incentives Trump Short-Run Market Power?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 34(4), pages 669-695.
  • Handle: RePEc:oup:apecpp:v:34:y:2012:i:4:p:669-695
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    File URL: http://hdl.handle.net/10.1093/aepp/pps045
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    1. repec:gam:jsusta:v:10:y:2018:i:3:p:652-:d:134062 is not listed on IDEAS
    2. repec:ags:afjare:225654 is not listed on IDEAS
    3. Çakır, Metin & Nolan, James, 2015. "Revisiting Concentration in Food and Agricultural Supply Chains: The Welfare Implications of Market Power in a Complementary Input Sector," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(2), May.
    4. Lodovico Muratori, 2016. "Price Gap along the Ugandan Coffee Value Chain," Working Papers 1/16, Sapienza University of Rome, DISS.
    5. Crespi, John M. & Xia, Tian, 2015. "A Note on First-Price Sealed-Bid Cattle Auctions in the Presence of Captive Supplies," Agricultural and Resource Economics Review, Cambridge University Press, vol. 44(03), pages 340-345, December.
    6. Wu, Steven Y., 2013. "Adapting Contract Theory to Fit Contract Farming," 2014 Allied Social Science Association (ASSA) Annual Meeting, January 3-5, 2014, Philadelphia, PA 161894, Agricultural and Applied Economics Association.
    7. Cordero Salas, Paula, 2016. "Relational Contracts and Product Quality: The Effect of Bargaining Power on Efficiency and Distribution," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(3), September.
    8. Zavelberg, Yvonne & Heckelei, Thomas & Wieck, Christine, 2016. "Entry deterring effects of contractual relations in the dairy processing sector," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(1), April.
    9. Johan F.M. Swinnen & Anneleen Vandeplas, 2014. "Price Transmission and Market Power in Modern Agricultural Value Chains," Working Papers id:5787, eSocialSciences.
    10. Mérel, Pierre & Sexton, Richard J., 2017. "Buyer power with atomistic upstream entry: Can downstream consolidation increase production and welfare?," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 259-293.
    11. Crespi, John M. & Hahn, William & Jones, Keithly & Schulz, Lee L. & Chen, Chen-Ti, 2016. "A Study in U.S. Export Beef Competitiveness: Do Cattle Inventories Matter?," 2017 Allied Social Science Association (ASSA) Annual Meeting, January 6-8, 2017, Chicago, Illinois 250113, Agricultural and Applied Economics Association.
    12. Dervillé, Marie & Allaire, Gilles, 2014. "Change of competition regime and regional innovative capacities: Evidence from dairy restructuring in France," Food Policy, Elsevier, vol. 49(P1), pages 347-360.
    13. Marco A. MARINI & Paolo POLIDORI & Desiree TEOBALDELLI & Alberto ZEVI, 2015. "Welfare Enhancing Coordination In Consumer Cooperatives Under Mixed Oligopoly," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(3), pages 505-527, September.

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