Market Power Analysis on Shrimp Import from Tropical Asia: The Korean Case

Shrimp is the most highly traded seafood product in the world. While tropical Asia is the leader in shrimp aquaculture and wild harvest, developed economies account for the lion’s share of global shrimp imports. Studies show market power issues arise from trade imbalances, regulatory standards, and the non-competitive structure of the market. Market power is largely defined as the ability to alter prices away from competitive levels or affect product quality and trade requirements. A market power analysis would provide insight into the extent to which trade liberalization and market dominance have improved the global shrimp trade. Focusing on food safety regulation and quarantine standards in Korea, this study aims to perform a market power analysis on shrimp imports from tropical Asia, including Vietnam, Thailand, and Malaysia. A residual supply approach is adopted to estimate the buyer power of the importer. Using a monthly panel dataset, the residual supply model contains key factors contributing to market power’s potential exercise. The results show that, Korea has market power for shrimp from Thailand and Malaysia. On the other hand, an interesting point is that Korea has no market power over Vietnam, which is accounted for more than half of the import share in Korea. However, the degree of Korean market power has been shown relatively low compared to the prior study.