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Oligopsony power with uniform spatial pricing: theory and application to milk processing in Spain

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  • AM Alvarez
  • EG Fidalgo
  • RJ Sexton
  • M Zhang

Abstract

This study presents a conceptual and empirical analysis of buyer oligopsony power in a spatial markets setting. The conceptual model analyses behaviour in a market with uniform spatial prices and Löschian conduct. A key result is that firms may set prices above the monopsony level to minimise direct competition among themselves. The empirical analysis focuses on the purchase of milk in the Asturias region of Spain and utilises a panel of firm-level data to study the determinants of milk processors' pricing behaviour. Estimation results strongly support the predictions of the theoretical model. Copyright 2000, Oxford University Press.

Suggested Citation

  • AM Alvarez & EG Fidalgo & RJ Sexton & M Zhang, 2000. "Oligopsony power with uniform spatial pricing: theory and application to milk processing in Spain," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 27(3), pages 347-364, September.
    • Handle: RePEc:oup:erevae:v:27:y:2000:i:3:p:347-364
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