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Price Transmission, Market Power And Returns To Scale: A Note

Author

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  • Xiuqing Wang
  • Habtu Tadesse
  • Tony Rayner

Abstract

In this paper, we aim to model the vertical relation between retailers and suppliers in the food industry whereby retailers exercise seller power in their relation with consumers and buyer power in their relation with producers. We then evaluate the degree of price transmission, relative to the perfectly competitive benchmark, from the farm to the retail sector assuming a supply shock. With the view to evaluating the impact of market power's interaction with industry technology on the degree of price transmission, we assume industry technology to be characterized by variable input proportions and non-constant returns to scale. Our model predicts that, relative to that which obtains when markets are perfectly competitive and industry technology is characterized by constant returns to scale, the degree of price transmission when market power and industry technology interact cannot be unambiguously determined.

Suggested Citation

  • Xiuqing Wang & Habtu Tadesse & Tony Rayner, 2006. "Price Transmission, Market Power And Returns To Scale: A Note," Discussion Papers 06/07, University of Nottingham, School of Economics.
    • Handle: RePEc:not:notecp:06/07
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    File URL: https://www.nottingham.ac.uk/economics/documents/discussion-papers/06-07.pdf
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    Citations

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    Cited by:

    1. repec:lic:licosd:34714 is not listed on IDEAS
    2. Pierluigi Montalbano & Rebecca Pietrelli & Luca Salvatici, 2017. "Market chain participation and food security: the case of the Ugandan maize farmers," Working Papers 2/17, Sapienza University of Rome, DISS.
    3. Lodovico Muratori, 2016. "Price Gap along the Ugandan Coffee Value Chain," Working Papers 1/16, Sapienza University of Rome, DISS.
    4. Mohammad Omrani & Mohammad Tash & Ahmad Akbari, 2016. "The Evaluation of Asymmetry in Price Transmission and Market Power in Iran Sugar Production Industry," Journal of Agricultural Science, Canadian Center of Science and Education, vol. 8(11), pages 127-127, October.
    5. Montalbano, P. & Pietrelli, R. & Salvatici, L., 2018. "Participation in the market chain and food security: The case of the Ugandan maize farmers," Food Policy, Elsevier, vol. 76(C), pages 81-98.
    6. Hailong Cai & Xiuqing Wang, 2010. "The substitution effect of cigarette excise tax for tobacco leaf tax in China," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 2(4), pages 385-395, November.
    7. Johan F.M. Swinnen & Anneleen Vandeplas, 2014. "Price Transmission and Market Power in Modern Agricultural Value Chains," Working Papers id:5787, eSocialSciences.

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