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The effect of buyer concentration on prices in the Australian wool market
Author(s) -
Simmons Phil,
Hansen Phillip
Publication year - 1997
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/(sici)1520-6297(199707/08)13:4<423::aid-agr8>3.0.co;2-0
Subject(s) - wool , economics , competition (biology) , herfindahl index , index (typography) , econometric analysis , market concentration , microeconomics , perfect competition , econometrics , market structure , agricultural economics , history , ecology , archaeology , world wide web , computer science , biology
Abstract A theoretical model of the wool market that distinguishes between large and small buyers is developed. The model forecasts that “large” buyers with a cost advantage will increase grower prices providing there is competition from a periphery of small, relatively high cost buyers. Econometric estimates of premiums associated with buyer concentration, as measured by the Herfindahl Index, are obtained using hedonic price analysis. The results are consistent with theory, and it is concluded that increased buyer concentration favors growers providing a “periphery” of small competitive firms remains intact. © 1997 John Wiley & Sons, Inc.