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Identification of Market Power in Bilateral Oligopoly: The Brazilian Wholesale Market of UHT Milk

Author

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  • Scalco, Paulo R.
  • Braga, Marcelo J.

Abstract

The aim of this study was to test the hypothesis of market power in the wholesale market for UHT milk. The structure of this market is an oligopoly characterized as bilateral and uses the model proposed by Schroeter et al. (2000), which allows testing the hypothesis of market power without assuming the restrictive hypothesis of price-taking behavior on one side of the market. The system of nonlinear simultaneous equations that determines quantity, wholesale and retail prices of UHT milk was estimated by nonlinear generalized method of moments. Estimation of conduct parameter was 0.638, rejecting the hypothesis of a perfectly competitive market. Evidences suggest that retailers exert oligopsony power on the dairy industry; however, the distortions caused by such market power could not be quantified.

Suggested Citation

  • Scalco, Paulo R. & Braga, Marcelo J., 2015. "Identification of Market Power in Bilateral Oligopoly: The Brazilian Wholesale Market of UHT Milk," 2015 Conference, August 9-14, 2015, Milan, Italy 212278, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae15:212278
    DOI: 10.22004/ag.econ.212278
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    References listed on IDEAS

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    3. Schroeter, John R. & Azzam, Azzeddine M. & Zhang, Mingxia, 2000. "Measuring Market Power in Bilateral Oligopoly: The Wholesale Market for Beef," Staff General Research Papers Archive 1777, Iowa State University, Department of Economics.
    4. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    5. John R. Schroeter & Azzeddine M. Azzam, & Mingxia Zhang, 2000. "Measuring Market Power in Bilateral Oligopoly: The Wholesale Market for Beef," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 526-547, January.
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    Cited by:

    1. Valtiala, Juho P. & Rezitis, Anthony N., 2017. "Examining Market Power in the Finnish Dairy Chain," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261419, European Association of Agricultural Economists.

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    Keywords

    Food Consumption/Nutrition/Food Safety; International Development; Marketing;
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