Analyses of market power for us and international beef markets

Abstract

This dissertation expands the conventional NEIO model by imposing the theoretical restrictions and proposes a method for measuring the degree of rivalry in contested markets.

The first empirical example estimates market power and social welfare loss in the US beef packing industry using an NEIO approach. This is differentiated from other NEIO studies in that this paper imposes zero-degree homogeneity on the US beef demand function and imposes concave curvature on the indirect cost function. The results confirm that there are significant effects of theoretical restrictions. When the homogeneity and the concavity condition are imposed simultaneously, market power and social welfare loss in the US beef packing industry are increased. Compared with other NEIO studies, the estimated market power and social welfare loss under the theoretical restrictions are significantly higher. This suggests that other NEIO studies may underestimate market power and social welfare loss. However, the estimated market power and social welfare loss may be overestimated as this study did not consider the cost efficiency effect of concentrated market structures, oligopsony power of beef packers, and marketing channels between beef packers and retailers.

The second empirical example estimates the degree of rivalry between the United States and Australia in the imported beef markets of South Korea and Japan. The proposed rivalry index is bounded between ‘0’ to ‘1’ indicating the market is perfectly competitive or perfectly collusive (cartel). Development of the index follows from a comparative static analysis of rivalry best response functions under Cournot and Stackelberg leader-follower assumptions in the case of quantity competition, and Bertrand and Stackelberg leader-follower assumptions under price competition. An empirical example estimates the degree of rivalry between the United States and Australia in the imported beef markets of South Korea and Japan. The results suggest that the best preferred models are quantity and price cartel for the Korean and the Japanese market. However, the rivalry index does not provide evidence of collusion between the United States and Australia. Trade barriers including high rated tariffs and safeguards and competition with importing country’s domestic beef suppliers may hinder the collusive behaviors of the US and Australia.