A stochastic frontier estimator of the aggregate degree of market power exerted by the U.S. beef and pork packing industries

Panagiotou, Dimitrios and Stavrakoudis, Athanassios (2016): A stochastic frontier estimator of the aggregate degree of market power exerted by the U.S. beef and pork packing industries.

Abstract

The objective of this study is to measure the amount of market power exercised by the U.S. red meatpacking industry using the recently developed stochastic frontier estimator of market power. The aggregate degree of market power in both the input market (cattle and hogs) and the output market (beef and pork) is estimated using annual time series data for the period 1970- 2009. The empirical results reveal that the farm-to-wholesale price spread is 4.91% and 4.16% above the marginal processing costs, in the beef and pork packing industries, respectively. These findings indicate that rather a small percentage of the farm-to-wholesale price spread can be attributed to market power in both U.S. meat packing sectors.

• Item Type: MPRA Paper
• Language: English
• Keywords: beef; pork; stochastic frontier analysis; market power
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L66 - Food ; Beverages ; Cosmetics ; Tobacco ; Wine and Spirits; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q11 - Aggregate Supply and Demand Analysis ; Prices

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