Multi-stage Market Power in the Italian Fresh Meat Industry

Posted by D. Daniel Sokol

Daniele Moroa, Paolo Sckokaia and Mario Veneziani (all Universita Cattolica del Sacro Cuore) discuss Multi-stage Market Power in the Italian Fresh Meat Industry.

ABSTRACT: In line with the New Empirical Industrial Organisation literature, a three-stage modelling of the fresh meat industry in Italy is developed to evaluate the extent of the oligopsonistic behaviour of downstream operators on upstream ones. Moreover, retailers are allowed to exercise oligopolistic market power over consumers purchasing three types of meats assumed substitutable in consumption. Employing a flexible technique for estimating such a model on a uniquely compiled database, evidence that market power is mainly exercised at the retail is unveiled. In fact, roughly 75 – 85% of the price margin at the retail level can be associated with the occurrence of oligopolistic market power. Empirical findings do not support the existence of oligopsonistic power of retailers over processors and of the latter over farmers.