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Market power and the volatility of markups in the food value chain: the role of Italian cooperatives

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  • Hyejin Lee
  • Johan Swinnen
  • Patrick Van Cayseele

Abstract

Agricultural cooperatives have often been promoted as a way to increase their market power and to obtain stability of profit against uncertainty. This paper estimates the firm-level markups and markup volatility to identify the countervailing market power of cooperatives in the Italian fruits and vegetable sector and the dairy sector. We use the firm-level data of Italian firms for the period 2007-2014. We find that, overall, there is a tradeoff in cooperatives’ role between obtaining market power and stability. Farmer cooperatives in both sectors gain stability in their markups but their markups are lower, on average, than those for non-cooperatives. For processor cooperatives, the fruits and vegetable sector obtains more market power. This appears to arise from the product differentiation strategy of the processors cooperative.

Suggested Citation

  • Hyejin Lee & Johan Swinnen & Patrick Van Cayseele, 2021. "Market power and the volatility of markups in the food value chain: the role of Italian cooperatives," Working Papers of Department of Economics, Leuven 674093, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:674093
    Note: paper number 424/2021
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    More about this item

    JEL classification:

    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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