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Competition in U.S. Farm Product Markets: Do Long‐Run Incentives Trump Short‐Run Market Power?
Author(s) -
Crespi John M.,
Saitone Tina L.,
Sexton Richard J.
Publication year - 2012
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1093/aepp/pps045
Subject(s) - market power , competition (biology) , economics , incentive , linkage (software) , power (physics) , production (economics) , short run , product (mathematics) , perfect competition , product market , microeconomics , market economy , industrial organization , monopoly , ecology , biochemistry , chemistry , physics , geometry , mathematics , quantum mechanics , gene , biology
This article addresses the current status of farm buyer market power. We argue that buyer power concerns are often overstated because traditional models of buyer power are incapable of depicting the economic interactions that are fundamental to modern agricultural markets, where exchange is governed by stable contractual relationships. Exercising short‐run oligopsony power is inimical to the long‐run interests of buyers in these settings because below‐competitive returns will lead to the exodus of resources from input production. Policy proposals grounded in the presumed linkage between concentration, competition, and market power may well be misguided and detrimental to the objectives that proponents seek to advance.