Current Agriculture, Food & Resource Issues
C. E. Ward
when prices are increasing. They examined monthly data for 1979-96 and for the sub-period
1992-96. Using the Herfindahl-Hirshman Index (HHI) as the measure of concentration in
beefpacking, they included it in the asymmetric price adjustment model. For the entire
period, there was no significant effect on marketing margins from increasing concentration.
However, for the sub-period there was a positive, significant effect. Thus, increased
concentration was associated with higher fed cattle prices and lower farm-wholesale
marketing margins. While unexpected based on the hypothesis of non-competitive behavior,
the positive effect was small. Matthews et al. hypothesized that gains experienced from
capitalizing on economies of size may be shared with cattle feeders, consistent with previous
research (Ward, Koontz, and Schroeder, 1998; Williams et al., 1996).
Ward and Stevens (2000) approached the question of concentration impacts on
marketing margins by examining price linkages from the producer-to-retail level in the beef
chain. Data were monthly observations over the 1974-94 period. They found that increased
beefpacker concentration has not translated into a weakening of the price linkage between
producers and packers or between packers and wholesale (i.e., purveyors-processors). They
found evidence that most of the pricing behavior change occurred at the retail not the packer
level. They further noted that concentration has not adversely influenced the speed of price
transmission in the beef chain. Thus, they concluded that increased beefpacker concentration
had little aggregate effect on price linkages between producers and packers.
Oligopoly and Oligopsony Market Power
Several studies reviewed in this section reflect the increased preference for the conjectural
variation approach. The intent is to measure directly the effect behavior has on performance,
i.e., the existence of oligopoly/oligopsony (or monopoly/monopsony) price distortions and
evidence of market power. However, other studies follow alternative approaches.
Schroeter (1988) was the first to apply the conjectural variation approach to beefpacking.
He developed a conceptual framework and applied it to annual data for the 1951-83 period.
He found significant conjectural elasticity estimates for 28 of the 33 years. Monopoly and
monopsony price distortions were relatively modest according to Schroeter, about 3 percent
and 1 percent, respectively. There was little evidence the degree of monopoly or monopsony
distortion had increased during the later years of the study, when beefpacking concentration
was beginning to increase sharply.
Azzam and Pagoulatos (1990) modified the conjectural variation approach to allow
different conjectures for input and output markets. They estimated the model with annual,
Census of Manufactures data for the meatpacking industry for the years 1959-82. Recall that
during this period concentration in meatpacking was relatively low compared with later years.
Azzam and Pagoulatos found non-competitive behavior in both the output and input
markets. Further analysis revealed the extent of oligopsony power was significantly higher
than that for oligopoly power.
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