Institutional Market Power in Comté: Insights from a ‘Double Marginalisation’ Model

This article explores the economic efficiency of a horizontally and vertically coordinated industry where upstream producers are atomised, but downstream processors are few, explicitly considering participation incentives and allowing the coordinated industry to exert market power towards buyers. The model offers insight into the probable social impacts of the government‐sanctioned supply control scheme in place in the French Comté cheese market, suggesting it falls short of constituting a Pareto‐improvement compared with a laissez‐faire situation. More generally, our theoretical model provides guidance to identify instances where encouraging industry coordination may be socially desirable. We formally introduce the concept of ‘seller‐equivalent degree of overall market power’ of the separated industry, a market characteristic comprised of measurable or inferable parameters, the value of which is shown to determine the potential for Pareto improvements through industry integration.     

Distinguishing the Source of Market Power

Structural models used to measure market power, though widely employed, continue to be criticized. We compare alternative market power tests, including nonparametric and Solow residual-based (SRB) tests. We develop SRB methods that permit nested testing for both monopolistic and monopsonistic market power by the same firm. These tests and a set of nonparametric tests are implemented to examine market power exertion by U.S. cigarette manufacturers from 1977 to 1993. All tests indicate that cigarette manufacturers exerted monopsonistic power in the upstream tobacco market. They are mixed on whether monopolistic power exertion was exerted in the downstream market.     

Modeling the Effects of Input Market Reforms on Fertiliser Demand and Maize Production: A Case Study from Kenya

Kenya is one of the few countries in Sub‐Saharan Africa to experience an impressive rise in fertiliser use following a series of input market reforms in the early 1990s. Two major consequences of these reforms were declining fertiliser marketing margins and distances between farmers and fertiliser dealers. We quantify the effects of these changes on commercial fertiliser use and maize production in Kenya by estimating fertiliser demand and maize supply response functions using nationwide household survey data. Our results indicate that between 1997 and 2010, the estimated 27% reduction in real fertiliser prices that can be attributed to falling marketing margins associated with market reforms led to a 36% increase in nitrogen use on maize fields and a 9% increase in maize production resulting from both yield and acreage effects. On the other hand, decreasing distances to fertiliser retailers from the perspective of a given household did not appear to raise fertiliser use or maize supply, although a comparison across households using average distances over the panel indicate that those closer to retailers do apply more fertiliser on their maize fields.     

Straddling Contract and Estate Farming: Accumulation Strategies of Senegalese Horticultural Exporters

This paper draws on primary qualitative data to explore the accumulation strategies of indigenous exporters in the Senegalese horticultural sectors who supply European markets. It argues that exporters straddle contract and estate farming as a strategy to break through and survive in European markets, where the power of large‐scale retailers is increasing and the proliferation of food standards act as a non‐tariff barrier. It also analyses the relative opportunities as well as the costs of contract and estate farming. Then it focuses on how the control of buyers over suppliers is far from complete, revealing downstream and upstream spaces and dynamics of non‐compliance. In conclusion, some reflections on the development of capitalism in Africa are advanced.     

Supplier-Retailer Relationships in the UK Fresh Produce Supply Chain

Abstract

Over the past decade, the UK fresh produce (fruit, vegetables, and salads) supply chain has undergone numerous changes, with retailers becoming increasingly powerful. The overall trend is towards the industry being dominated by a few large corporations operating on a national level, with some corporations even operating on a European or global scale. This process, which could significantly impact on the supplierretailer relationships, is examined in this study using indepth interviews with participants from the fresh produce supply chain. Amongst the findings are the following: Supply chain advancements, including backhauling, and factory gate pricing are causing some controversy because suppliers feel that these initiatives do not benefit their relationships with retailers. There is room for supplierretailer relationship improvement in areas such as trust, co-operation, and collaboration. Retailers, who have significant supply chain power, are starting to acknowledge the importance of suppliers in the gaining of gaining retail market share. Lastly, the intense process of supplychain rationalisation that we have seen in recent years appears to be leveling out in the UK fresh produce supply, such that there is less anticipated further rationalisation. The study outlines a series of recommendations for how suppliers (retailers) can improve their relationships with retailers (suppliers).     

Information Exchange and Strategic Behavior in Supply Chains: Application to the Food Sector

Information technology (IT) facilitates information exchange between retailers and suppliers. Based on evidence from food industry, information strategies under uncertainty are analyzed, using game theory. Some key results are under certain conditions, retailers withhold valuable sales data from suppliers even if this means less supply coordination; a revealed equilibrium exists where suppliers learn retailers' market data despite retailers' withholding of such data; this leads either to full information convergence or, surprisingly, incomplete information convergence with some informational asymmetry left; retailers with greater market power and numerous suppliers are more inclined to share, rather than to withhold, information.     

Price and Volatility Transmission and Market Power in the German Fresh Pork Supply Chain

We investigate the relationship between the transmission of price volatility and market power in the German fresh pork supply chain. We use a theoretical model underpinning this relationship followed by an empirical application that uses monthly farm, slaughterhouse and retail pork price data for the period 2000–2011. We examine both the relationships of market power with price level transmission and price volatility transmission in the chain. We use a vector error correction model and least squares regressions to analyse price transmission and price volatility transmissions, respectively. Results show that retail market power limited both types of transmissions. Competition inducing policy measures coupled with measures that support price risk management initiatives of chain actors are suggested.     

Measuring the Effects of Generic Dairy Advertising in a Multi-Market Equilibrium

We develop a multi-market equilibrium displacement model that allows demand linkages across downstream product markets, and supply linkages through the common use of a raw commodity as the key input. Applying the model to the dairy sector, we find that the effectiveness of producer-funded advertising depends on the demand relationships across dairy product markets (cross-price and cross-advertising elasticities) as well as the reallocation of milk toward the advertised market. We show that the previous literature, which ignores the horizontal linkages highlighted here, tends to overstate the effectiveness of generic commodity promotion for dairy, and thus results in too much advertising.     

The Potential for Nitrogen Abatement Trading in Agriculture: A Hypothetical Market Experiment

The effectiveness of nitrogen abatement trading as a policy measure relies on both heterogeneity in costs and environmental effectiveness across landscapes. Cost‐efficient implementation may therefore critically depend on spatial distributions of farm and farmer characteristics in water catchments. We use a spatially specific hypothetical market experiment to analyse the likelihood of farmers’ enrolment into nitrogen abatement trading contracts, and derive demand and supply functions for farmers’ nitrogen abatement. We find that farm characteristics influence both the decision whether to supply or purchase nitrogen abatement, as well as the amounts being traded. The derived demand and supply functions for farmers’ N abatement, using hypothetical market experiment data, can be used to reveal the variability in costs of abatement within a market. This provides valuable information to test potential trading schemes ex ante, to evaluate potential economic gains from policy implementation.     

Transnational links in rhino poaching and the black‐market price of rhino horns

Rhino poaching in South Africa and India's major range states have been remarkably similar over time. Organised criminal syndicates manage an illegal supply chain of rhino horns from poachers, middlemen and corrupt authorities to East Asian black‐markets. In this paper, we use rhino poaching data from South Africa and India to examine the plausibility of transnational links and coordination in their supplies of rhino horns. We develop an innovative model of oligopolistic collusion in supply and find empirical evidence to support the theory, while controlling for rhino horn demand features, corruption, governance quality, and conservation policy. Furthermore, we propose an inventory management model of a criminal syndicate that controls the horn supply chain. The method retraces and forecasts black‐market prices and has potential applicability in estimating supply or demand elasticities. This paper is the first to suggest an oligopolistic feature of the poaching industry. It highlights the need to reorient conservation policy to account for possible coordination of rhino horn supplies between range states.     

The role of temperature for seasonal market integration: a case study of poultry in Iran*

Understanding market integration has greatly benefited from analysing and comparing variations in price transmissions. An important source of variation in agricultural markets is seasonal changes in production, consumption and transaction costs. A key factor driving seasonality in agricultural price is temperature, as supply and demand changes are triggered by seasonal temperature differences. In this paper, we study the seasonal variations in vertical price transmission focusing on the asymmetric price adjustment to analyse changes in the market interactions between the stages of the value chain. Our data reveal significant transitory effects of temperature on the price transmission process. Results of a panel threshold model suggest that the farm–wholesale price adjustments to deviations from the market equilibrium are more symmetric at higher temperatures. However, we do not find an effect of temperature on the wholesale–retail price relationship. Our findings can be rationalised with wholesalers making use of their market power to extend their margins in the upstream chain. Wholesaler market power is lower during warm periods, and price adjustment is more symmetric. Concerning the Iranian poultry value chain, our findings imply that temperature-related differences in market interactions should be considered in formulating policy interventions.     

Price shock transmission: evidence from the wheat‐bread market value chain in Ethiopia

This study assesses the degree of vertical price transmission along the wheat‐bread value chain in Ethiopia. This is pursued by applying a vector error correction model and an impulse response analysis using monthly price data for the period 2000–2015. Our analysis considers transmission of price shocks across different market levels, including from the international and domestic wheat grain markets at the upstream to the domestic wheat bread market at the downstream of the value chain. The empirical findings indicate that significant cointegration exists across prices of the different market stages. There is a transmission from international prices to domestic prices at downstream markets, in particular to flour and bread prices. Prices at upstream markets are largely influenced by the domestic wholesale market. In general, the speed of adjustment is quite slow with a half‐life of about one year for restoring the equilibrium price relationship. As price margins between the different market stages in the value chain have substantially decreased in the last 15 years, higher transmission, and thus exposure to international market shocks, can be expected in the future. The results also show that causal relationships exist between prices at different market stages—with the wholesale market identified as the key market level where prices and price expectations are formed.     

Is It Worth Getting Labeled? The Case of MSC-Certified Seafood

Research has examined consumers’ attitudes toward ecolabels, but there is a lack of research examining whether niche ecolabels give a competitive advantage in consumer markets. The authors aim to fill this gap by exploring the four conditions of market success (evidence of price premiums, market share, access to retailers, and elasticities) established in the literature. Three varieties of MSC-certified fish are studied. Differences are observed across the three varieties that lead to the following conclusions: MSC-labeled products do not systematically sell at a premium; price has an inelastic effect on the demand of certified national brands, but increased distribution has a very elastic effect on demand; and MSC-labeled products do not experience seasonal effects. The consumer market is responding favorably to the label, but ecolabeled fish is in an introductory stage. Price premiums vary; the retailer’s brand is playing a prominent role.     

木材加工业供应链伙伴关系现状研究

用信任、关系承诺和依赖性3个维度作为衡量木材加工业供应链伙伴关系的调查指标,对福建省莆田市70家木材加工业供应链企业的性质、企业参与木材加工业供应链的情况、企业对供应链上下游企业更加偏好信任的企业类型以及木材加工业供应链的伙伴关系进行问卷调查。调查结果表明:不少原木材或木制品流通企业开始走上了工贸结合的道路,绝大多数被调查企业既有上游供应商也有下游厂商或经销商,一半的企业更加信任供应链上游企业;在木材加工业供应链中,多数企业对上下游企业之间的信任度较高、关系承诺较好,多数企业认为通过建立供应链伙伴关系能实现双方共赢但倾向于有更好的供应商或厂商时选择更换。因此,建议在木材加工供应链伙伴企业间,建立以木材行业协会为纽带的信任机制,建立以核心企业为中心的长期合作关系,建立信息共享平台,促进木材加工业供应链伙伴间的信息共享。     

Evolving Supply Chains in the Nutraceuticals and Functional Foods Industry

The rapid growth of the nutraceutical and functional foods industry in recent years has necessitated the development of new supply chain relationships. These supply chains are interesting because of the uncertain regulatory, technological and market environment in which they have evolved. Challenges include concentration in upstream input supply and downstream manufacturing sectors, intellectual property rights protection, asset specific investments in an uncertain market environment, and establishing credible quality signals for credence attributes in an era of regulatory uncertainty and consumer scepticism.     

Imperfect Price Transmission: Is Market Power Really to Blame?

Several studies in the literature have argued that price transmission in vertically‐related markets is imperfect, i.e. that farm input price changes are not fully passed‐through to the final product price. Market power, notably oligopoly, is presumed to be the principal source of imperfect price transmission. To date, the impact of oligopsony (buyer) power on the degree of price transmission has not been evaluated using a formal theoretical model. Moreover, neither has the combination of oligopoly and oligopsony despite the fact that its influence has been formally acknowledged in both the UK and some European food markets. This paper makes a contribution to the literature by developing a model of price transmission where both oligopoly and oligopsony power co‐exist and where industry technology is assumed to be characterised by variable input proportions. It shows that taking the degree of price transmission in a perfectly competitive market as a benchmark, oligopoly and oligopsony power do not necessarily lead to imperfect price transmission, although they can. Indeed, they may counteract each other's impact on the degree of price transmission. The key to these outcomes is to be found in the functional forms for retail demand and farm supply.     

“互联网+”背景下农产品供需信息平台建设博弈分析

[目的]农产品是关乎国计民生的必需品,在"互联网+"背景下,国家大力提倡农业信息化建设,为农业现代化发展提供新一轮契机。但由于我国小农经济、农地分散、农民素质普遍不高、农业技术化程度总体较低等多方原因,造成长久以来我国农产品供给与需求不对称情况,频繁出现"菜贱伤农、菜贵伤民"现象,如何利用现代信息技术改善农产品供需信息不对称现象成为社会关注的焦点。[方法]文章在文献研究基础上,主要运用完全信息静态博弈及冷酷战略模型对农产品信息共享平台建设的必要性进行分析。[结果]博弈分析结果显示,供应链上下游组织间共享信息次数只要有足够多,就可以在供应链中建立起良好的互动关系,通过信息共享可以有助于供应链条上企业合作,实现共赢。[结论]信息共享平台建设可以有效提升农产品信息沟通效率,有效解决农产品供需信息不对称问题。     

Country of origin labeling for complex supply chains: the case for labeling the location of different supply chain links

We investigate the value of a country of origin label (COOL) that separately identifies the geographic location of different stages in a food product's supply chain. We estimate the willingness‐to‐pay (WTP) of U.S. consumers for a packaged cereal product where the key grain ingredient may be grown in one country and processed in a second country (multicountry supply chain) and compare it to equivalent products that have both stages located in a single country. We find consumer WTP for products with single‐country and multicountry supply chains are statistically different, meaning that simplifying a multicountry label by listing only the country where the ingredients are grown or only the country where the ingredients are processed can result in different consumer values. We also find that for countries with a poor quality reputation, consumers respond more negatively when that country has the “last touch” than when that country's involvement is limited to upstream supply chain links.     

Measuring Market Power for Food Retail Activities: French Evidence

In this paper we develop and estimate an empirical model of pricing behaviour for food retail firms in both a quantity‐setting oligopoly engaged in the joint production of demand‐related final goods and a quantity‐setting oligopsony for supply‐unrelated wholesale goods. The procedure consists of estimating an inverse demand system for the final goods, single supply functions for the wholesale goods and the retail industry first‐order profit‐maximisation conditions, from which an estimate of the degree of imperfect competition and of oligopoly‐oligopsony power for the different commodities can be retrieved. The model is applied to the French food retail industry and three commodities are distinguished: dairy products, meat products and other food products. We strongly reject the hypothesis that French food retail firms behave competitively, and more than 20 and 17 per cent of the wholesale‐to‐retail price margins for dairy products and meat products, respectively, can be attributed to oligopoly‐oligopsony distortions.     

Intertemporal analysis of employment decisions on agricultural holdings in Slovenia

The article attempts to quantify determinants influencing the dynamics of employment decisions on agricultural holdings in Slovenia and to test specific aspects of labor reallocation during the transition period by the application of an agricultural household model. Through the use of a 1991–2000 longitudinal data set for 22,055 farm households, quantitative analysis of intertemporal employment decisions by farm holders is carried out using probit techniques. The determinants tested relate to the personal characteristics of farm holders (gender, age, education level, and potential off‐farm income), household characteristics (size, structure), characteristics of the agricultural holding (economic size, labor intensity), and local labor market conditions. The model results generally confirm existing empirical evidence on asymmetrical and irreversible participation of holders on the labor market. Despite intensive restructuring of agriculture and profound changes in the nonfarm labor market in the analyzed period, labor supply of farm holders remains rigid. The mobility of labor supply is lower than expected, which can be attributed to the importance of structural problems constraining intersectoral mobility. Low labor mobility reduces the efficiency of labor allocation on agricultural holdings in Slovenia. Elements of this problem emerge on both supply (e.g., low level of educational and professional attainment of reference persons) and demand sides of the labor market (e.g., unfavorable local labor market conditions). A marked tendency toward maintaining the same employment status is more distinct in the case of holders employed on‐farm only.