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Oligopoly Power in the Food Industries Revisited: A Stochastic Frontier Approach

Rigoberto Lopez (), Hualu Zheng () and Azzeddine Azzam
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Hualu Zheng: University of Connecticut

No 39, Working Papers from University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy

Abstract: This study estimates mark-ups and oligopoly power for U.S. food industries using a stochastic frontier (SF; Kumbhakar, Baardsen and Lien, 2012; Baraigi and Azzam, 2014) approach, where mark-ups are treated as systematic deviations from a marginal cost pricing frontier. We apply the analysis to 36 U.S. food industries using NBER-CES Manufacturing Industry Database (2014), which covers a span of 31 years from 1979 to 2009. Empirical results show that all the food industries in the sample exercise at least some degree of oligopoly power, but most in a moderate manner. The estimated mean Lerner index is approximately 0.06, generally much lower than obtained using the conventional NEIO approaches. The SF model used provides a novel and promising framework to test and measure the degree of market power in agricultural and food markets.

Keywords: oligopoly power; market power; food industries; stochastic frontier (search for similar items in EconPapers)
Pages: 11 pages
Date: 2015-07
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Working Paper: Oligopoly Power in the Food Industries Revisited: A Stochastic Frontier Approach (2015) Downloads
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