Oligopsony Fed Cattle Pricing: _x000B_Did Mandatory Price Reporting Increase Meatpacker Market Power?

Xiaowei Cai, Kyle W. Stiegert and Stephen R. Koontz

No 285343, 2011 Conference, April 18-19, 2011, St. Louis, Missouri from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: The Livestock Mandatory Price Reporting Act became law in April 2001 with the intent to provide more transparent market information to cattle producers. A criticism of mandatory price reporting (MPR) is that the increased price transparency may actually increase oligopsony power exercised by beef packers. We examine beefpacking margins using time periods before and after MPR was implemented with a Markov model that tests for switching between cooperative and noncooperative pricing. Switching is indicative of noncompetitive conduct and we examine the duration and magnitude of market power. One key finding is that market power is two times higher after MPR than before. The second is that, while this study produces some of the largest measures of market power associated with fed cattle pricing, market power remains rather small and is consistent with prior research. Last, we offer the caveat that there is more occurring in fed cattle and beef markets during last 20 year than the transition from voluntary to mandatory price reporting. So MPR is likely not the only cause of increased market power. But there is clearly more market power exercised in fed cattle markets after 2001 than before.

Keywords: Marketing (search for similar items in EconPapers)
Date: 2011-04
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nccc11:285343

DOI: 10.22004/ag.econ.285343

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