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Buyer and/or seller power? An application to the Brazilian milk market

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  • Paulo R. Scalco
  • Rigoberto A. Lopez
  • Xi He

Abstract

Despite its importance, the co-existence of buyer and seller power has been largely neglected in the empirical literature. In this article, we develop a stochastic frontier model to measure channel market power as deviations from a perfectly competitive frontier and decompose it into buyer and seller power. We provide an empirical illustration using milk data from five Brazilian states and find that channel market power ranges between 4% and 12% of the wholesale price, but that 75% of the market power is accounted for by retail buyer power. The methodology proposed can provide a rapid assessment of the degree of market power in other markets and a method for separating out buyer and seller power in the market channel.

Suggested Citation

  • Paulo R. Scalco & Rigoberto A. Lopez & Xi He, 2017. "Buyer and/or seller power? An application to the Brazilian milk market," Applied Economics Letters, Taylor & Francis Journals, vol. 24(16), pages 1173-1176, September.
    • Handle: RePEc:taf:apeclt:v:24:y:2017:i:16:p:1173-1176
    DOI: 10.1080/13504851.2016.1262515
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    Cited by:

    1. Dimitrios Panagiotou, 2019. "Market Power Effects of the Livestock Mandatory Reporting Act in the U.S. Meat Industry: a Stochastic Frontier Approach Under Uncertainty," Journal of Industry, Competition and Trade, Springer, vol. 19(1), pages 103-122, March.
    2. Yuquan Chen & Xiaohua Yu, 2022. "Estimating market power for the Chinese fluid milk market with imported products," Agribusiness, John Wiley & Sons, Ltd., vol. 38(2), pages 386-401, April.
    3. Dimitrios Panagiotou & Athanassios Stavrakoudis, 2018. "A stochastic frontier estimator of the aggregate degree of market power exerted by the US meat packing industry," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(3), pages 387-401, September.
    4. Perekhozhuk, Oleksandr & Chezhia, Giorgi & Glauben, Thomas, 2021. "Measuring Oligopsony Market Power in Kazakh Grain-Processing Industry: Converging Evidence from Two Structural Approaches," 2021 Conference, August 17-31, 2021, Virtual 315345, International Association of Agricultural Economists.
    5. Dimitrios Panagiotou & Athanassios Stavrakoudis, 2020. "A Stochastic Frontier Analysis Approach for Estimating Market Power in the Major US Meat Export Markets," Journal of Industry, Competition and Trade, Springer, vol. 20(3), pages 569-586, September.

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