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MONOPSONY POWER IN MULTIPLE INPUT MARKETS: A Nonparametric Approach

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  • Raper, Kellie Curry
  • Love, H. Alan

Abstract

Cigarette manufacturers' monopsony power exertion in procuring domestic and imported tobacco is investigated using nonparametric methods. While it is often assumed that tobacco program rents are captured by growers, results indicate the opposite actually occurs. Cigarette manufacturers appear to exert significant monopsony power in the domestic leaf tobacco market and capture a large portion of program rents. Cigarette manufacturers appear to exert monopsony power of much smaller magnitude in the international leaf tobacco market, but with increasing magnitude in more recent years.

Suggested Citation

  • Raper, Kellie Curry & Love, H. Alan, 1999. "MONOPSONY POWER IN MULTIPLE INPUT MARKETS: A Nonparametric Approach," Staff Papers 11656, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  • Handle: RePEc:ags:midasp:11656
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    File URL: http://purl.umn.edu/11656
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    References listed on IDEAS

    as
    1. Lilyan E. Fulginiti & Richard K. Perrin, 1992. "Theory and Measurement of Producer Response under Quotas, The," Center for Agricultural and Rural Development (CARD) Publications 92-wp94, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. H. Alan Love & C. Richard Shumway, 1994. "Nonparametric Tests for Monopsonistic Market Power Exertion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(5), pages 1156-1162.
    3. James A. Chalfant & Bin Zhang, 1997. "Variations on Invariance or Some Unpleasant Nonparametric Arithmetic," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1164-1176.
    4. Blake Brown, A. & Martin, Laura L., 1996. "Price versus Quota Reductions: U.S. Flue-Cured Tobacco Policy," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 28(02), pages 445-452, December.
    5. Sullivan, Daniel, 1985. "Testing Hypotheses about Firm Behavior in the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 586-598, June.
    6. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140.
    7. Lambert, David K., 1994. "Technological Change in Meat and Poultry-Packing and Processing," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(02), pages 591-604, December.
    8. Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-1019, October.
    9. A. Blake Brown, 1995. "Cigarette Taxes and Smoking Restrictions: Impacts and Policy Implications," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(4), pages 946-951.
    10. Ashenfelter, Orley & Sullivan, Daniel, 1987. "Nonparametric Tests of Market Structure: An Application to the Cigarette Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 483-498, June.
    11. Fulginiti, Lilyan & Perrin, Richard, 1993. "The Theory and Measurement of Producer Response under Quotas," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 97-106, February.
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    More about this item

    Keywords

    market power; tobacco; nonparametric; monopsony; imports.; International Relations/Trade; L1;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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