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Market power in the German dairy value chain

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  • Aaron Grau
  • Heinrich Hockmann

Abstract

In this paper, the NEIO approach is extended to allow for oligopsony power in successive markets of a value chain. Two price equations are deduced from simultaneous partial equilibria of the endogenous variables and are embedded in a VECM to account for a long†run cointegration relationship. The model is estimated via the Kalman–Filter to allow for time variation in the long†run parameters, and a dynamic factor model used to extract a common factor from the time†variant coefficients. The results are then used to calculate the industry average input conjectural elasticities. The framework is applied to German dairy value chain data over the time period of January 2000 to March 2011. The results indicate almost perfect competition in the raw milk market and imperfect competition in the dairy output market, which is however far from monopsony. [EconLit citations: L13, D43, C32, Q13].

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  • Aaron Grau & Heinrich Hockmann, 2018. "Market power in the German dairy value chain," Agribusiness, John Wiley & Sons, Ltd., vol. 34(1), pages 93-111, December.
    • Handle: RePEc:wly:agribz:v:34:y:2018:i:1:p:93-111
    DOI: 10.1002/agr.21529
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