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What does the stochastic frontier estimator of market power really account for? A theoretical analysis with references from the food industry

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  • Panagiotou, Dimitrios

Abstract

The objective of this study is to demonstrate that the recently developed stochastic frontier (SFA) estimator of market power measures mark{ups in the output market, as the seminal paper demonstrates, only under a specic market structure. The measurement of market power along the food market- ing channel is employed in order to derive our theoretical ndings. The results indicate that, without prior knowledge of the structure of the market under investigation, it is only safe to say that the SFA estimator of market power measures the sum of oligopolistic and oligopsonistic distortions.

Suggested Citation

  • Panagiotou, Dimitrios, 2017. "What does the stochastic frontier estimator of market power really account for? A theoretical analysis with references from the food industry," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 0(Issue 2), July.
    • Handle: RePEc:ags:aergaa:330604
    DOI: 10.22004/ag.econ.330604
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    References listed on IDEAS

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    1. Subal Kumbhakar & Sjur Baardsen & Gudbrand Lien, 2012. "A New Method for Estimating Market Power with an Application to Norwegian Sawmilling," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(2), pages 109-129, March.
    2. repec:aei:rpaper:34013 is not listed on IDEAS
    3. Dimitrios Panagiotou & Athanassios Stavrakoudis, 2017. "A Stochastic Production Frontier Estimator of the Degree of Oligopsony Power in the U.S. Cattle Industry," Journal of Industry, Competition and Trade, Springer, vol. 17(1), pages 121-133, March.
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    7. Azzeddine M. Azzam, 1998. "Competition in the US meatpacking industry: is it history?," Agricultural Economics, International Association of Agricultural Economists, vol. 18(2), pages 107-126, March.
    8. Azzeddine Azzam & Hans Andersson, 2008. "Measuring Price Effects of Concentration in Mixed Oligopoly: An Application to the Swedish Beef-slaughter Industry," Journal of Industry, Competition and Trade, Springer, vol. 8(1), pages 21-31, March.
    9. Timothy J. Coelli & D.S. Prasada Rao & Christopher J. O’Donnell & George E. Battese, 2005. "An Introduction to Efficiency and Productivity Analysis," Springer Books, Springer, edition 0, number 978-0-387-25895-9, December.
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