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Market power in the German dairy value chain
Author(s) -
Grau Aaron,
Hockmann Heinrich
Publication year - 2017
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/agr.21529
Subject(s) - economics , imperfect competition , cointegration , econometrics , market power , value (mathematics) , microeconomics , mathematics , statistics , monopoly
In this paper, the NEIO approach is extended to allow for oligopsony power in successive markets of a value chain. Two price equations are deduced from simultaneous partial equilibria of the endogenous variables and are embedded in a VECM to account for a long‐run cointegration relationship. The model is estimated via the Kalman–Filter to allow for time variation in the long‐run parameters, and a dynamic factor model used to extract a common factor from the time‐variant coefficients. The results are then used to calculate the industry average input conjectural elasticities. The framework is applied to German dairy value chain data over the time period of January 2000 to March 2011. The results indicate almost perfect competition in the raw milk market and imperfect competition in the dairy output market, which is however far from monopsony. [EconLit citations: L13, D43, C32, Q13].