Price Behavior in a Dynamic Oligopsony: Washington Processing Potatoes

Timothy J. Richards, Paul M. Patterson and Ram N. Acharya

American Journal of Agricultural Economics, 2001, vol. 83, issue 2, 259-271

Abstract: Punishment strategies are necessary to sustain a collusive oligopsony in a repeated game context when demand is uncertain and only market variables are observable. This article proposes a test for tacit collusion among potato processors in Washington state using a dynamic regime-switching model estimated with a finite mixture method. The results support the existence of punishment and collusive regimes and show the welfare losses due to anti-competitive behavior on the part of processors to be significant. Processors' oligopsony power is enhanced by higher domestic production, imports, and existing stocks, but it is ameliorated by high capacity utilization rates and exports. Copyright 2001, Oxford University Press.

Date: 2001
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