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Market Power and/or Efficiency: An Application to U.S. Food Processing

  • Rigoberto A. Lopez
  • Azzeddine M. Azzam
  • Carmen Liron-Espana

This article separates oligopoly-power and cost-efficiency effects of changes in industrial concentration and assesses their impact on output prices in 32 food-processing industries. Empirical results indicate that although concentration induces cost efficiency in one-third of the industries, oligopoly-power effects either dominate cost efficiency or reinforce inefficiency, resulting in higher output prices in most industries. The article also provides fresh econometric estimates of oligopoly power and economies of size for the industries in question.

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File URL: http://fmpc.uconn.edu/publications/rr/rr60.pdf
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Paper provided by University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy in its series Food Marketing Policy Center Research Reports with number 060.

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Date of creation: 2001
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Handle: RePEc:zwi:fpcrep:060
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Web page: http://www.zwickcenter.uconn.edu
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  1. Morrison Paul, Catherine J., 2000. "Cost Economies and Market Power: The Case of the U.S Meat Packing Industry," Working Papers 190897, University of California, Davis, Department of Agricultural and Resource Economics.
  2. Nevo, Aviv, 1998. "Measuring Market Power in the Ready-To-Eat Cereal Industry," Research Reports 25164, University of Connecticut, Food Marketing Policy Center.
  3. Azzam, Azzeddine M, 1997. "Measuring Market Power and Cost-Efficiency Effects of Industrial Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 377-86, December.
  4. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
  5. Peltzman, Sam, 1977. "The Gains and Losses from Industrial Concentration," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 229-63, October.
  6. Olson, Dennis O. & Shieh, Yeung-Nan, 1989. "Estimating functional forms in cost-prices," European Economic Review, Elsevier, vol. 33(7), pages 1445-1461, September.
  7. Schroeter, John R. & Azzam, Azzeddine M., 1990. "Measuring Market Power in Multi-Product Oligopolies: The U.S. Meat Industry," Staff General Research Papers 11112, Iowa State University, Department of Economics.
  8. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  9. Schroeter, John R., 1988. "Estimating the Degree of Market Power in the Beef Packing Industry," Staff General Research Papers 11114, Iowa State University, Department of Economics.
  10. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-86, August.
  11. Perry, Martin K, 1984. "Scale Economies, Imperfect Competition, and Public Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 313-33, March.
  12. Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
  13. Bian Lin & Donald McFetridge, 1997. "The efficiencies defence in merger cases: Implications of alternate standards," Carleton Industrial Organization Research Unit (CIORU) 97-03, Carleton University, Department of Economics.
  14. Golan, Amos & Judge, George & Perloff, Jeffrey M, 1996. "Estimating the Size Distribution of Firms Using Government Summary Statistics," Journal of Industrial Economics, Wiley Blackwell, vol. 44(1), pages 69-80, March.
  15. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  16. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  17. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 372-75, November.
  18. Martin, Stephen, 1988. "Market Power and/or Efficiency?," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 331-35, May.
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