Oligopsony Power: Evidence from the U.S. Beef Packing Industry

Xiaowei Cai, Kyle Stiegert (kwstiegert@wisc.edu) and Stephen R. Koontz

No 49364, 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin from Agricultural and Applied Economics Association

Abstract: Based on Green and Porter's (GP) noncooperative game theoretic model, oligopsonists are hypothesized to follow a discontinuous pricing strategy in equilibrium. The model allows for low procurement prices during cooperative phases and high procurement prices (i.e. aggressive purchasing) during noncooperative phases. In this paper, the GP model is applied to the U.S. beef packing industry. Anecdotal evidence of beef packer margins and relevant processing costs suggest part of the margin variability could be attributed breakdowns and returns to cooperative phases. To operationalize the GP framework, we applied Hamilton's regime switching model assuming first order Markov process to test for the cooperative/noncooperative behavior of beef packers in three main fed cattle markets in the central United States and the whole U.S. market. We found that the evidence of cooperative/noncooperative conduct among the beef packers is present in all the markets examined, but the conduct varies across markets.

Keywords: Industrial; Organization (search for similar items in EconPapers)
Pages: 25
Date: 2009
New Economics Papers: this item is included in nep-agr, nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://ageconsearch.umn.edu/record/49364/files/613372-3.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea09:49364

DOI: 10.22004/ag.econ.49364

Access Statistics for this paper

More papers in 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin from Agricultural and Applied Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search (aesearch@umn.edu).