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Milking the Milkers: A Study on Buyer Power in the Dairy Market of Peru

José A. Tavera and Tilsa Oré Mónago
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José A. Tavera: Departamento de Economía de la Pontificia Universidad Católica del Perú

No 2018-470, Documentos de Trabajo / Working Papers from Departamento de Economía - Pontificia Universidad Católica del Perú

Abstract: The literature on imperfect competition suggests the existence of two conditions facilitating the exercise of buyer market power: the existence of an inelastic and upward-sloping supply, and the existence of high concentration in purchases. In this study, we use monthly aggregate data (from 1999-2014) of the raw milk market in Peru. We test whether those conditions hold, by analyzing the market and estimating the supply elasticity. Our findings suggest the existence of buyer power in raw milk market since an inelastic raw milk supply and a highly concentrated market is verified. Our assessment is reinforced with the role played by the existing market power of the firms at the downstream segment and the existence of entry barriers in that market segment. JEL Classification-JEL: L11, L12, L13, L41, L42

Keywords: Milk Demand; Dairy Industry; Evaporated Milk; Raw Milk; Monempory; Monopsony; Milk Supply; Buyer Power (search for similar items in EconPapers)
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Date: 2018
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