Measuring market power in the Greek food and beverages manufacturing industry

This paper measures the degree of market power of the Greek food and beverages manufacturing industry over the period 1983–2007 at the three-digit SIC level. The present study also estimates the “deadweight” loss and the reduction of consumers’ income due to the possible existence of market power in the Greek food and beverages manufacturing industry. Based on Bresnahan’s (1989) conjectural variation model, three different approaches are used to investigate competitive conditions of the Greek food and beverages manufacturing industry. The first approach assesses the extent of market power of the whole industry over the period 1983–2007; the second approach tests the degree of market power in each one of the nine sectors of the industry over the whole period, i.e. 1983–2007; and the third one estimates the extent of market power for the whole Greek food and beverages manufacturing industry for specific sub-periods of the period 1983–2007. The methodology of Dickson and Yu (1989) is adopted to measure the welfare losses. The empirical results indicate the presence of some degree of market power in the whole Greek food and beverages manufacturing industry as well as in each one sector of the industry during the period 1983– 2007 and, as a result, the existence of welfare losses. In addition, the empirical findings support the presence of some degree of market power for each sub-period of the period 1983– 2007 in the whole Greek food and beverages manufacturing industry and the existence of welfare losses.