Measuring the Degree of Market Power Exerted by Government Trade Agencies

H. Love and Endah Murniningtyas

American Journal of Agricultural Economics, 1992, vol. 74, issue 3, 546-555

Abstract: The principle of profit maximization is used to derive an equilibrium condition for noncompetitive markets and to provide explicit parametric tests for market power exerted in both domestic and foreign markets by a government trade agency. Our study goes beyond previous work by considering simultaneous exertion of market power in both domestic and foreign markets and by jointly estimating market power parameters with cost and demand parameters. These innovations allow nested tests of market power as opposed to prevailing nonnested tests based on simulation models or conditional tests based on prior estimates of demand and cost parameters. Japan is found to exert a high degree of monopsony power in the world wheat market and no monopoly power in the domestic market.

Date: 1992
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Working Paper: Measuring the Degree of Market Power Exerted by Government Trade Agencies (1990)
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