Volume 12, Issue 1 -

In this paper, we utilize the complete set of quantitative tests at the disposal of economists for delineating antitrust markets. This includes the Small but Significant Increase in Price (SSNIP) test but also a large number of traditional and newer price co-movement tests. We apply these tests to the savory snacks market using Greek bi-monthly data. This market has been subject to many antitrust investigations because of its market structure and its important implications for consumer welfare. However, no dominant view has yet emerged regarding the appropriate definition of the relevant market. Our results indicate that a wide relevant market definition is appropriate.

We discuss the analysis of policy in three “spaces”: the customary ( q , p ) space, “policy space,” and “welfare space.” Specific advantages of conducting policy analysis in welfare and policy spaces are as follows: (1) it makes clearer the distributional consequences of policy change instead of focusing solely on the aggregate welfare consequences of policy change; (2) it facilitates covering a very wide array of available policy options, instead of examining just a few; (3) it is a powerful tool for analyzing the effects of simultaneous use of multiple policy instruments; and (4) it clarifies what it means for policies to be more/less “efficient,” and for policy instruments to make each other more/less “efficient.” We demonstrate the usefulness of our framework in comparing and critiquing various conclusions recently expressed in the U.S. ethanol policy literature.

Asset obsolescence or external obsolescence isa decline in the economic value of capital because ofa decrease in demand for the capital’s services. Measurements of sunk costs typically use appraised values of capital. In food and agricultural industries facing asset obsolescence due to government policy, appraised values may be greatly overstated and this has implications for research on industrial structure. A theoretical model to account for the appraisal error is developed and the method is applied to the U.S. sugar beet industry. The sugar beet industry displays symptoms of asset obsolescence. Our estimates indicate that plant appraisals using currently accepted practices greatly overstated the true value of these assets in 2006.

In a lab experiment, two milk bottles with different levels of omega-3 were offered to participants for eliciting willingness to pay. We find that a simple message on the difference regarding the omega-3 content between bottles significantly impacts the participants’ willingness to pay for these bottles. The exit questionnaire also shows that participants would prefer the exclusive use of the omega-3 label posted on the bottle with the highest content in omega-3. From an interpretation of questionnaires and elicited willingness to pay, simulations show that the exclusive use of one label signaling omega-3 would have a positive impact on both profits and consumers’ surpluses.

The subject of this paper is Open Innovation (OI) in the food and drink industry (FDI). Both academics and managers are pushing for improved knowledge in the practice of OI. To this end they have invited researchers to include traditional, low-tech industries in their analyses, since these have been poorly investigated (Gassmann, Enkel, and Chesbrough. 2010. “The Future of Open Innovation.” R& D Management 40(3):213–21). In accepting this invitation, we shall be focusing our attention on the FDI, which is going through a transition phase. Although traditionally characterized by a low propensity towards OI, FDI has recently started to open up its innovation processes on account of developments in the competitive context. Hence, a survey involving 284 companies from three countries (UK, Italy and Spain) was carried out. Results show that FDI can be indicated as a sector under increasing pressure to open up. This is an important result that will add to the literature on this topical debate, more especially as the role exerted by the industry in OI choices still remains ambiguous.

This paper explores the economic conditions for the viability of organic farming in a context of imperfect competition. While most research dealing with this issue has adopted an empirical approach, we propose a theoretical approach. Farmers have a choice between two technologies, the conventional one using two complementary inputs, chemicals and seeds, and the organic one only requiring organic seeds. The upstream markets are oligopolistic and the firms adopt Cournot behavior. The game is solved backward. The equilibrium distribution of the farmers between both sectors is obtained by a free-entry condition. Since multiple equilibria could exist, including the non-emergence of organic farming, we spell out viability conditions for organic farming. Then, using an “infant industry” argument, we propose several public policy instruments able to support the development of organic farming and assess their relative efficiency. Results could be useful to assess the conditions of emergence and viability of agricultural innovations in analogous contexts.

We measure the degree of market power Thailand has in its major rice export markets. Elasticities of residual demands for Thai rice for its important export destinations of China, Indonesia, USA, and South Africa were estimated and used as indicators of the degree of competition or market power in each respective market. Thai rice exports were classified into four categories consisting of aggregated white rice, Hommali rice, glutinous rice, and parboiled rice. For aggregated rice exports, the results reveal that Thailand does not have market power to influence export prices in its four major export markets. Instead, Thailand faces fierce competition from the rice-exporting countries of Vietnam and India, whose rice appears to be very close substitutes to Thai rice. Likewise, in the case of the disaggregated Hommali rice export market, Thailand does not possess market power. However, results indicate that Thailand has some market power in the glutinous rice export markets to China and Indonesia. Lastly, Thailand appears to have significant market power over parboiled rice export to South Africa. These results are useful in ongoing discussions of Thailand rice policies.

Protected designations of origin (PDOs) and protected geographical indications (PGIs) for food products are used by the European Union with the goal of achieving several policy objectives. We build a multi-criteria analysis framework for ex post assessment of the performance of PDOs. The performance criteria are based on five policy objectives, as defined by European policy makers in regulations, with each criterion measured by a set of indicators. We apply the framework to analyze the performance of all Italian PDO cheeses and olive oils from 2004 to 2008. The results show that for the PDOs studied it is feasible, in general, to perform on all five objectives at the same time, although partial tradeoffs are present between the bargaining power and local development objectives on one side and the market performance objective on the other. A ranking of PDOs in the two sectors on all objectives using multi-criteria analysis and equal weights on all objectives shows overall higher performance for smaller PDOs that are well rooted in the territory of origin and targeted to niche market segments. Lower ranked PDOs under this scenario tend to be bigger, older, and better established in wider markets. Alternative weighting scenarios that emphasize niche/local market PDOs or market performing PDOs yield different relative rankings. The results provide insights for both policy makers and stakeholders into the evaluation of PDO policy, as well as into the performance of individual PDO products.

In contrast to the increasing use of GM plants in agriculture worldwide, the acceptance of GM food is still low in the European Union. If GM food products were introduced in the EU, the German food industry would be confronted with increased efforts to separate GM and non-GM processing lines and it would have to perform compulsory quality management. This paper analyses the costs of co-existence for producers of frozen pizza and chocolate in Germany. In order to provide an idea of the general magnitude of these costs, an adaptive calculation model was developed, supported by qualitative information from expert interviews for both sectors. The case studies reveal that the possibilities of the companies are quite different in terms of size, infrastructure, and available resources to operate parallel production. Companies which already have sufficient existing facilities to run separated production lines might have the opportunity for specialisation and could manage a possible emerging GM market situation.

Several factors (including rising incomes, urbanization, a young population, and more women in the labor force) have influenced retailing in India in recent years, with the emergence and rapid spread of supermarkets being the most dramatic change. Without disputing the high growth rates of organized retail in the food sector, in this study we test whether supermarket growth is associated with greater demand for nonprice attributes such as food safety and customization of products. Using on-site surveys at supermarkets in three Indian cities of different population sizes and income levels, and using ordered models for consumer choice, we find that nonprice attributes remain subordinate to price for consumers in supermarkets. At the same time, rising import penetration in supermarkets creates an outlet where some consumers can satisfy their demand for nonprice attributes that are not provided by domestic products. The fact that such attributes are not demanded of domestic products and that imports fill in to provide these nonprice attributes implies that demand pull for back-end development is weak in Indian food retail. This is important, because a command approach by the government to induce back-end development will work only if enforcement is strong, which seems unlikely.

This paper analyses the influencing factors of farmers’ use of price hedging instruments (PHIs) based upon a discrete choice experiment with German grain farmers. A mixed logit model is used to determine whether farmers’ choices of PHIs against cash sales are influenced by their price expectation, their risk attitude and their available storage capacities. The results show that farmers with a price expectation below the actual price level have a higher preference for using PHIs against cash sales in general and that the individual degree of risk aversion can have a significant impact on farmers’ choices of a specific PHI. A generally lower preference of farmers with available storage capacities for using PHIs as assumed in many theoretical contributions in the literature, however, cannot be confirmed.