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Horizontal merger simulation in a Cournot oligopoly with competitive fringe: The U.S. broiler industry case

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  • Lulu Pi
  • Tomislav Vukina

Abstract

This article analyzes the impact of a recent merger between the third and the seventh largest broiler producers in the United States on the equilibrium of the downstream broiler market. Reflective of the broiler industry market structure, in the theoretical part of the article we adopt the model of a Cournot oligopoly with a competitive fringe and then apply merger simulation to predict the welfare effects. We fit our theoretical framework to the pre‐merger data under the assumption of different numbers of oligopoly firms. The results suggest that the merger between Sanderson Farms and Wayne Farms will significantly increase the market price of chicken meat and decrease consumer surplus, and that the magnitude of these impacts hinges on the size of the oligopoly. The net welfare effect could be positive or negative, but it is not statistically significant at the 5% level.

Suggested Citation

  • Lulu Pi & Tomislav Vukina, 2025. "Horizontal merger simulation in a Cournot oligopoly with competitive fringe: The U.S. broiler industry case," American Journal of Agricultural Economics, John Wiley & Sons, vol. 107(3), pages 869-887, May.
    • Handle: RePEc:wly:ajagec:v:107:y:2025:i:3:p:869-887
    DOI: 10.1111/ajae.12511
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    References listed on IDEAS

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