Oligopsony Power in the Ukrainian Milk Processing Industry: Evidence from the Regional Markets for Raw Milk

Perekhozhuk, Oleksandr and Grings, Michael and Glauben, Thomas (2009): Oligopsony Power in the Ukrainian Milk Processing Industry: Evidence from the Regional Markets for Raw Milk.

Abstract

Most of the studies based on the New Empirical Industrial Organization (NEIO) approach use the industry data to estimate the degree of market power at the national level. Yet, only a few empirical studies presented the results that measure the degree of market power at the regional level and found the existence of market power in the regional markets. While the fact is that there is an extensive evidence for the existence of potential oligopsony market power in the Ukrainian milk processing industry (price cartels and geographic market sharing among milk processing enterprises, interference of the state authorities, higher concentration on regional markets), the estimation results of the market structure model at the national level did not produce any evidence suggesting the exercise of oligopsony power (the estimated parameter of oligopsony power is close to zero and statistically insignificant). The objective of this study is to estimate the degree of oligopsony power in the regional market for raw milk. The estimation results of the market structure model at the regional level indicate the existence of oligopsony power in nine out of the twenty three regions of Ukraine.

• Item Type: MPRA Paper
• Language: English
• Keywords: New Empirical Industrial Organization (NEIO); Oligopsony Power; Ukraine
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

References

Amemiya, T. (1977). The Maximum Likelihood Estimator and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model. Econometrica 45: 955-968.

Antimonopoly Committee of Ukraine. Annual reports of Antimonopoly Committee of Ukraine. Various years. [In Ukrainian].

Azzam, A. M. (1998). Competition in the US meatpacking industry: is it history?. Agricultural Economics 18: 107-126.

Bresnahan, T. F. (1982). The oligopoly solution concept is identified. Economics Letters 10: 87-92. Bresnahan, T. F. (1989). Empirical Studies of Industries with Market Power. In Schmalensee, R. and Willig, R. D. (eds), Handbook of Industrial Organization 2: 1011-1057. Amsterdam: Elsevier Science B.V..

Christensen, L. R., Jorgenson D.W. and Lau, L. J. (1973). Transcendental Logarithmic Productions Frontiers. The Review of Economics and Statistics 55: 28-45. Dovgalyuk, P. and Konovalyuk, O. (2003). Milk rivers in the antimonopoly shores. Competition. Bulletin of the Antimonopoly Committee of Ukraine 6 (15). [In Ukrainian].

Koontz, S. R. and Garcia, P. (1997). Meat-Packer Conduct in Fed Cattle Pricing: Multiple-Market Oligopsony Power. Journal of Agricultural and Resource Economics 22 (1): 87-103.

Lau, L. J. (1982). On identifying the degree of competitiveness from industry price and output data. Economics Letters 10: 93-99.

Perekhozhuk, O. (2007): Marktstruktur und Preisbildung auf dem ukrainischen Markt für Rohmilch. Studies on the Agricultural and Food Sector in Central and Eastern Europe 41. <http://www.iamo.de/dok/sr_vol41.pdf>.

Perekhozhuk, O., Grings, M. and Glauben, T. (2008). Production technology and market power in the Ukrainian milk processing industry. In Schäfer C., Rupschus C. Nagel U. J. (Eds.), Second Green Week Scientific Conference: Enhancing the Capacities of Agricultural Systems and Producers. Berlin: 163-169.

SAS (2008): SAS/ETS User´s Guide, Version 9.2, Cary, NC: SAS Institute Inc.

Seredyuk, L. (2003). Even small competitors - the threat of monopoly. Competition. Bulletin of the Antimonopoly Committee of Ukraine 1 (4). [In Ukrainian].

Sexton, R. J. and Lavoie, N. (2001). Food Processing and Distribution: an Industrial Organization Approach. In Gardner B. and Rausser G. (eds), Handbook of Agricultural Economics 1: 863-932. Amsterdam: Elsevier Science B.V..

State Committee of Statistics of Ukraine: Industrial producer price indices. Various issues. [In Ukrainian].

State Committee of Statistics of Ukraine: Industrial products of Ukraine. Various issues, Kyiv. [In Ukrainian].

State Committee of Statistics of Ukraine: Statistical Bulletin 'The sale of agricultural products to procurement organizations by agricultural enterprises'. Various issues. [In Ukrainian].

State Committee of Statistics of Ukraine: Statistical Bulletin 'The sale of milk and dairy products to procurement organizations of the milk processing industry by all types of agricultural farms'. Various issues. [In Ukrainian].

State Committee of Statistics of Ukraine: Statistical Bulletin 'The statistical summary data about state stock-breeding by all types of agricultural farms'. Various issues. [In Ukrainian].

State Committee of Statistics of Ukraine: Statistical Yearbook of Ukraine. Various issues. [In Ukrainian].

State Committee of Statistics of Ukraine: Statistical Yearbook 'Labour of Ukraine'. Various issues. [In Ukrainian]

US Census bureau (2001). Concentration Rations in Manufacturing.

Wann, J. J. and Sexton, R. J. (1992). Imperfect competition in multiproduct food industries with application to pear processing. American Journal of Agricultural Economics 74: 980-990.

Weliwita, A. and Azzam, A. (1996). Identifying Implicit Collusion under Declining Output Demand. Journal of Agricultural and Resource Economics 21(2): 235-246.

Wohlgenant, M. K. (2001). Marketing Margins: Empirical Analysis. In Gardner, B., Rausser, G. (eds), Handbook of Agricultural Economics 1: 933-970. Amsterdam: Elsevier Science B.V.