Identification of Market Power in the Hungarian Dairy Industry: A Plant-Level Analysis
-
Oleksandr Perekhozhuk
,
Heinrich Hockmann
Abstract
The objective of this paper is to provide an alternative model which can be used to test for oligopsony market power applying plant-level data. For this purpose, we took into account empirical studies and specific developments in the Hungarian dairy industry and specified a model that provides useful benchmarks for an econometric test of market power. The results of the econometric analysis show that the effects from policy changes in Hungary, as well as from plant specific issues are highly statistically significant, and produce evidence suggesting the exercise of oligopsony market power in the Hungarian dairy industry.
Appendix
Estimated parameters of FGNLS estimation with robust standard errors.
| Parameter | Model 1 | Model 2 | Model 3 | Model 4 | ||||
| Coef. | Std. Err. | Coef. | Std. Err. | Coef. | Std. Err. | Coef. | Std. Err. | |
 | −0.0092 | (0.0085) | −0.0096 | (0.0081) | −0.0199 | (0.0083) | −0.0210 | (0.0079) |
 | 0.9635*** | (0.0051) | 0.9072*** | (0.0078) | 0.9173*** | (0.0091) | 0.9176*** | (0.0084) |
 | 0.0244 | (0.0085) | 0.0320* | (0.0085) | 0.0195 | (0.0080) | 0.0205 | (0.0082) |
 | 0.0277 | (0.0130) | 0.0908*** | (0.0161) | 0.0854*** | (0.0162) | 0.0841*** | (0.0154) |
 | −0.0042** | (0.0016) | −0.0033 | (0.0016) | 0.0000 | (0.0013) | −0.0002 | (0.0013) |
 | 0.1354*** | (0.0203) | 0.1367*** | (0.0178) | 0.1349*** | (0.0206) | 0.1365*** | (0.0202) |
 | 0.0134 | (0.0122) | 0.0158 | (0.0109) | 0.0084 | (0.0096) | 0.0082 | (0.0098) |
 | 0.0206 | (0.0220) | 0.0539* | (0.0207) | 0.0490 | (0.0223) | 0.0545* | (0.0214) |
 | −0.0008 | (0.0007) | −0.0020** | (0.0007) | −0.0002 | (0.0007) | −0.0001 | (0.0007) |
 | −0.0443*** | (0.0132) | −0.0395*** | (0.0125) | −0.0290** | (0.0108) | −0.0265* | (0.0115) |
 | −0.1008*** | (0.0246) | −0.1194*** | (0.0222) | −0.1180*** | (0.0237) | −0.1226*** | (0.0233) |
 | −0.0147*** | (0.0023) | −0.0150*** | (0.0022) | −0.0009 | (0.0030) | −0.0010 | (0.0032) |
 | 0.0613*** | (0.0131) | 0.0549*** | (0.0117) | 0.0482*** | (0.0112) | 0.0467*** | (0.0112) |
 | 0.0005 | (0.0022) | 0.0014 | (0.0019) | −0.0005 | (0.0015) | −0.0005 | (0.0016) |
 | 0.0155*** | (0.0023) | 0.0163*** | (0.0022) | 0.0018 | (0.0028) | 0.0022 | (0.0030) |
 | −0.0087*** | (0.0011) | −0.0950*** | (0.0109) | −0.0966*** | (0.0130) | ||
 | 0.0134*** | (0.0031) | 0.0130*** | (0.0032) | ||||
 | 0.1822*** | (0.0249) | 0.1866*** | (0.0243) | ||||
 | 0.0016 | (0.0017) | ||||||
 | −0.0046 | (0.0128) | ||||||
 | 0.0301 | (0.0186) | ||||||
 | 0.0007 | (0.0015) | ||||||
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- 1
Many studies carried out on milk markets in industrialized countries, point out reasons for the existence of oligopsony power such as the perishable nature of raw milk, high storage and transport costs, and limited access to alternative milk buyers. Alvarez et al. (2000) examined processor oligopsony power in the procurement of milk in one Spanish region and found that Spanish dairy processors exercise spatial oligopsony power over dairy farmers. Graubner et al. (2011) investigated spatial competition in the German raw milk market and found evidence that price transmission between producers and processors is in line with cooperative or non-cooperative behavior.
- 2
The results on concentration ratios for the largest dairy plants are similar to the calculations performed by König and Major (2006) who considered the market share of the largest dairy firms in Hungarian dairy industry in 2004 and 2005.
- 3
The Merger Guidelines of the U.S. Department of Justice and the Federal Trade Commission that classify the spectrum of market concentration as measured by the HHI into three regions: (1) unconcentrated (HHI below 1,000), (2) moderately concentrated (HHI between 1,000 and 1,800), and (3) highly concentrated (HHI above 1,800).
- 4
Similar assumptions may be found in the works of Schroeter (1988), Azzam and Pagoulatos (1990) and Morrison Paul (2001).
- 5
Details on estimation methods are given in Greene (2003, 339–77) and Cameron and Trivedi (2005, 214–22).
- 6
For a more detailed description of the data collection see Békés, Harasztosi, and Muraközy (2009).
- 7
According to the data on reorganization and liquidation of firms represented by Gray, Schlorke, and Szanyi (1995) most of firms in Hungary were liquidated rather than reorganized.
- 8
On January 1, 2006, the monetary values of 12,234.7, 1,466.7, and 3.717 million HUF equaled 57.4, 6.9, and 17.4 thousand US Dollar, respectively.
- 9
The feasible generalized nonlinear least-squares (FGNLS) estimators were also applied, but reveal statistical inferences identical to those reported here.
- 10
For details on uncentered R-square see Greene (2003, 414) and Cameron and Trivedi (2005, 241).
- 11
We employ different nonlinear estimation methods and procedures to avoid estimation problems as autocorrelation, heteroskedasticity and selection bias. First, we estimated the models using a nonlinear least-squares (NLS) estimator with robust and clustered standard errors. Second, the feasible generalized nonlinear least-squares (FGNLS) estimators were also applied to the models in order to check the robustness of our results. Appendix Table A presents the estimation results of the four estimated models using the FGNLS estimator. The estimated coefficients are nearly identical for both estimation methods.
©2013 by Walter de Gruyter Berlin / Boston
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Artikel in diesem Heft
- Masthead
- Masthead
- Identification of Market Power in the Hungarian Dairy Industry: A Plant-Level Analysis
- Cartels and Rent Sharing at the Farmer–Trader Interface: Evidence from Ghana’s Tomato Sector
- Research Article
- Understanding Challenges to Food Security in Dry Arab Micro-States: Evidence from Qatari Micro-Data
- Planning Marketing Channels: Case of the Olive Oil Agribusiness in Portugal
- (A)symmetry, (Non)linearity and Hysteresis of Pricing-To-Market: Evidence from German Sugar Confectionery Exports
- Oligopolistic Market Structure in the Japanese Pistachio Import Market
- Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes
- A Mechanism Design of Dispute Resolution Systems in a Regional-Free Trade Agreement
- Conflict over Cooperation: Why So Much Disagreement over the Proposed Dairy Market Stabilization Program?
- U.S. Brewing Industry Profitability: A Simultaneous Determination of Structure, Conduct, and Performance
- The Cooperative Yardstick Revisited: Panel Evidence from the European Dairy Sectors
