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Does Vertical Integration Effect Market Power? Evidence from U.S. Food Manufacturing Industries

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  • Bhuyan, Sanjib

Abstract

The issue of whether vertical integration can raise market power is hotly debated because firms have a market power-related incentive to integrate vertically. Using a sample of U.S. food manufacturing industries, this “market power” motive is empirically tested in this study. Empirical analysis shows that forward vertical ownership integration (or vertical mergers) did not increase food manufacturers’ market power in the final product market. The study, however, shows that both market structure and conduct significantly influenced market power in the food industries.

Suggested Citation

  • Bhuyan, Sanjib, 2005. "Does Vertical Integration Effect Market Power? Evidence from U.S. Food Manufacturing Industries," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 37(1), pages 1-14, April.
    • Handle: RePEc:ags:joaaec:43737
    DOI: 10.22004/ag.econ.43737
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    References listed on IDEAS

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    1. Henry W. Kinnucan & Robert G. Nelson, 1993. "Vertical Control and the Farm-Retail Price Spread for EGGS," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 15(3), pages 473-482.
    2. Richard J. Sexton, 2000. "Industrialization and Consolidation in the U.S. Food Sector: Implications for Competition and Welfare," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(5), pages 1087-1104.
    3. Lawrence, John D. & Kliebenstein, James, 1995. "Contracting and Vertical Coordination in the United States Pork Industry," Staff General Research Papers Archive 5050, Iowa State University, Department of Economics.
    4. Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
    5. Kliebenstein, James & Lawrence, John D., 1995. "Contracting and Vertical Coordination in the United States Pork Industry," ISU General Staff Papers 199501010800001264, Iowa State University, Department of Economics.
    6. James B. Kliebenstein & John D. Lawrence, 1995. "Contracting and Vertical Coordination in the United States Pork Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(5), pages 1213-1218.
    7. Caves, Richard E. & Bradburd, Ralph M., 1988. "The empirical determinants of vertical integration," Journal of Economic Behavior & Organization, Elsevier, vol. 9(3), pages 265-279, April.
    8. Kliebenstein, James B. & Lawrence, John D., 1995. "Contracting and Vertical Coordination in the United States Pork Industry," ISU General Staff Papers 199507010700001264, Iowa State University, Department of Economics.
    9. Sanjib Bhuyan, 2002. "Impact of Vertical Mergers on Industry Profitability: An Empirical Evaluation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(1), pages 61-79, February.
    10. Esposito, Louis & Esposito, Frances Ferguson, 1971. "Foreign Competition and Domestic Industry Profitability," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 343-353, November.
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    Cited by:

    1. Jürgen Wandel, 2011. "Business groups and competition in post-Soviet transition economies: The case of Russian “agroholdings”," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 24(4), pages 403-450, December.
    2. Niquidet, Kurt & O'Kelly, Glen, 2010. "Forest-mill integration: A transaction cost perspective," Forest Policy and Economics, Elsevier, vol. 12(3), pages 207-212, March.
    3. Jebaraj Asirvatham & Sanjib Bhuyan, 2018. "Incentives and Impacts of Vertical Coordination in a Food Production-Marketing Chain: A Non-cooperative Multi-Stage, Multi-Player Analysis," Journal of Industry, Competition and Trade, Springer, vol. 18(1), pages 59-95, March.
    4. Ms. Deniz O Igan & Ali Mirzaei & Tomoe Moore, 2018. "How Do Regulations of Entry and Credit Access Relate to Industry Competition? International Evidence," IMF Working Papers 2018/084, International Monetary Fund.
    5. Rakesh Basant & Pulak Mishra, 2019. "Impact of Vertical Integration on Market Power in Indian Manufacturing Sector During the Post-Reform Period," Journal of Industry, Competition and Trade, Springer, vol. 19(4), pages 561-581, December.
    6. Basant, Rakesh & Mishra, Pulak, 2017. "Vertical Integration, Market Structure and Competition Policy: Experiences of Indian Manufacturing Sector during the Post Reform Period," IIMA Working Papers WP 2017-09-02, Indian Institute of Management Ahmedabad, Research and Publication Department.

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