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Retail and wholesale market power in organic apples

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  • Timothy J. Richards
  • Ram N. Acharya
  • Ignacio Molina

Abstract

The demand for organic fresh fruits and vegetable continues to grow at a rate far higher than the rest of the produce industry. The cost of meeting organic certification standards, however, has meant that supply has been slow to adjust. With limited supply, the authors hypothesize that organic suppliers enjoy more market power in bargaining over their share of the retail-production cost margin for fresh apples. We test this hypothesis using random parameters, generalized extreme value demand model (mixed logit) combined with a structural model of retail and wholesale pricing that allows conduct to vary by product attributes (organic or nonorganic) and time. They apply this model to data on wholesale prices of organic and nonorganic apples from Washington State, and retail data from five major metropolitan markets. They find that organic growers do indeed earn a larger share of the total margin than nonorganic growers, but this vertical market power is eroding over time as market supply adjusts. [EconLit citations: C35; D12; D43; L13; L41; Q13]. (C) 2010 Wiley Periodicals, Inc.

Suggested Citation

  • Timothy J. Richards & Ram N. Acharya & Ignacio Molina, 2011. "Retail and wholesale market power in organic apples," Agribusiness, John Wiley & Sons, Ltd., vol. 27(1), pages 62-81, Winter.
  • Handle: RePEc:wly:agribz:v:27:y:2011:i:1:p:62-81
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    File URL: http://hdl.handle.net/10.1002/agr.20251
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    Cited by:

    1. Moro, Daniele & Paolo, Sckokai & Veneziani, Mario, 2012. "Multi-stage Market Power in the Italian Fresh Meat Industry," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125065, Agricultural and Applied Economics Association.
    2. Céline Bonnet & Zohra Bouamra-Mechemache, 2016. "Organic Label, Bargaining Power, and Profit-sharing in the French Fluid Milk Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(1), pages 113-133.

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