Meat-packer conduct in fed cattle pricing: Multiple-market oligopsony power

Stephen R. Koontz, Philip Garcia

Research output: Contribution to journalArticlepeer-review

Abstract

The exercise of market power across multiple geographic fed cattle markets is measured with an econometric model which links behavior of the margin between boxed beef and regional fed cattle prices to an oligopsony model of multiple-market conduct. The game theoretic economic model suggests that for market power to be exercised in a single market a discontinuous pricing strategy must be followed. Total market power is enhanced if meat-packers coordinate this pricing strategy across geographic markets. Tests reject independence of pricing conduct across geographic markets which suggests multiple-market market power is present. The extent of the market power also is consistent with the economic model. More market power is exercised across regions with the same meat-packing firms. However, the magnitude of the market power is small and decreased between the early and late 1980s.

Original languageEnglish (US)
Pages (from-to)87-103
Number of pages17
JournalJournal of Agricultural and Resource Economics
Volume22
Issue number1
StatePublished - Jul 1 1997
Externally publishedYes

Keywords

  • Meat-packer multiple-market conduct
  • Noncooperative game theory
  • Oligopsony power

ASJC Scopus subject areas

  • Animal Science and Zoology
  • Agronomy and Crop Science
  • Economics and Econometrics

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