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Competition in U.S. Farm Product Markets: Do Long-Run Incentives Trump Short-Run Market Power?

John Crespi, Tina L. Saitone and Richard J. Sexton

Applied Economic Perspectives and Policy, 2012, vol. 34, issue 4, 669-695

Abstract: This article addresses the current status of farm buyer market power. We argue that buyer power concerns are often overstated because traditional models of buyer power are incapable of depicting the economic interactions that are fundamental to modern agricultural markets, where exchange is governed by stable contractual relationships. Exercising short-run oligopsony power is inimical to the long-run interests of buyers in these settings because below-competitive returns will lead to the exodus of resources from input production. Policy proposals grounded in the presumed linkage between concentration, competition, and market power may well be misguided and detrimental to the objectives that proponents seek to advance.

Date: 2012
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Applied Economic Perspectives and Policy is currently edited by Timothy Park, Tomislav Vukina and Ian Sheldon

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