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A stochastic production frontier estimator of the degree of oligopsony power in the U.S. cattle industry

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  • Panagiotou, Dimitrios
  • Stavrakoudis, Athanassios

Abstract

The objective of this study is to estimate the degree of oligopsony power in the U.S. cattle industry with the use of the recently developed stochastic frontier estimator of market power. Unlike the seminal paper where estimation of the mark-up in an output market at firm level was the main objective, this work proposes a stochastic production frontier estimator in order to estimate the mark-down in an input market at aggregate level. Furthermore, with the help of the new estimator we derive and estimate the Lerner index of oligospony power for the U.S. cattle market. For the empirical part of the study we employed annual time series data from the U.S. cattle/beef industry for the time period 1970-2009. Our results suggest that beef packers exert market power when purchasing live cattle for slaughter.

Suggested Citation

  • Panagiotou, Dimitrios & Stavrakoudis, Athanassios, 2015. "A stochastic production frontier estimator of the degree of oligopsony power in the U.S. cattle industry," MPRA Paper 73525, University Library of Munich, Germany, revised 2016.
    • Handle: RePEc:pra:mprapa:73525
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    25. Azzeddine M. Azzam, 1997. "Measuring Market Power and Cost‐efficiency Effects of Industrial Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 377-386, December.
    26. Kumbhakar,Subal C. & Lovell,C. A. Knox, 2003. "Stochastic Frontier Analysis," Cambridge Books, Cambridge University Press, number 9780521666633.
    27. Azzeddine Azzam, 1998. "Captive Supplies, Market Conduct, and the Open-Market Price," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 76-83.
    28. Panagiotou, Dimitrios, 2005. "Cointegration, Error Correction, And The Measurement Of Oligopsony Conduct In The U.S. Cattle Market," 2005 Annual meeting, July 24-27, Providence, RI 19201, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Cited by:

    1. Dimitrios Panagiotou, 2019. "Market Power Effects of the Livestock Mandatory Reporting Act in the U.S. Meat Industry: a Stochastic Frontier Approach Under Uncertainty," Journal of Industry, Competition and Trade, Springer, vol. 19(1), pages 103-122, March.
    2. Panagiotou, Dimitrios, 2017. "What does the stochastic frontier estimator of market power really account for? A theoretical analysis with references from the food industry," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 0(Issue 2), July.
    3. Dimitrios Panagiotou & Athanassios Stavrakoudis, 2018. "A stochastic frontier estimator of the aggregate degree of market power exerted by the US meat packing industry," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(3), pages 387-401, September.
    4. Maximilian Koppenberg & Stefan Hirsch, 2022. "Output market power and firm characteristics in dairy processing: Evidence from three EU countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 490-517, June.
    5. Dimitrios Panagiotou & Athanassios Stavrakoudis, 2020. "A Stochastic Frontier Analysis Approach for Estimating Market Power in the Major US Meat Export Markets," Journal of Industry, Competition and Trade, Springer, vol. 20(3), pages 569-586, September.
    6. Rao Fu & Chenguang Li & Liming Wang, 2021. "Market Power in the Irish Beef Processing Industry," Sustainability, MDPI, vol. 13(11), pages 1-18, June.

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    More about this item

    Keywords

    cattle; stochastic frontier analysis; oligopsony; market power;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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