Buyer and/or seller power? An application to the Brazilian milk market |
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| Authors: | Paulo R Scalco Rigoberto A Lopez Xi He |
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| Institution: | 1. Faculty of Management, Accounting and Economics, Federal University of Goias, Goiania, GO, Brazil;2. Dept. of Agricultural and Resource Economics, University of Connecticut, Storrs, CT, USA |
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| Abstract: | Despite its importance, the co-existence of buyer and seller power has been largely neglected in the empirical literature. In this article, we develop a stochastic frontier model to measure channel market power as deviations from a perfectly competitive frontier and decompose it into buyer and seller power. We provide an empirical illustration using milk data from five Brazilian states and find that channel market power ranges between 4% and 12% of the wholesale price, but that 75% of the market power is accounted for by retail buyer power. The methodology proposed can provide a rapid assessment of the degree of market power in other markets and a method for separating out buyer and seller power in the market channel. |
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| Keywords: | Market power buyer power seller power stochastic frontier |
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