Friday, July 3, 2009
Posted by D. Daniel Sokol
In a delicious analysis, Pierre R. Mérel, University of California, Davis - Department of Agricultural and Resource Economics undertakes Measuring Market Power in the French Comté Cheese Market.
ABSTRACT: A new empirical industrial organisation approach is used to measure seller market power in the French Comté cheese market, characterised by government-approved supply control. The estimation is performed on quarterly data at the wholesale stage over the period 1985-2005. Three different elasticity shifters are included in the demand specification, and the supply equation accounts for the existence of the European dairy quota policy. The market power estimate is small and statistically insignificant. Monopoly is clearly rejected. Results appear to be robust to the choice of functional form and suggest little effect of the supply control scheme on consumer prices.