Advertisement

Review of Industrial Organization

, Volume 36, Issue 1, pp 37–58 | Cite as

Market Diversion and Market Power: California Eggs

  • William J. Allender
  • Timothy J. Richards
Article

Abstract

Allegations of price-fixing by US egg producers maintain that the industry’s strategic use of export programs softens competition in the domestic market. This study provides an empirical investigation into these allegations using retail market data from a specific California retail market. Our findings suggest that the antitrust complaints have economic merit, but the deviations from competitive behavior are small.

Keywords

Antitrust investigation Eggs Game theory Nested logit Empirical industrial organization 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Reference

  1. American Egg Board. (2008). Retrieved September 29, 2009, from http://www.aeb.org/.
  2. Azzam A., Pagoulatos E. (1990) Testing oligopolistic and oligopsonistic behavior: An application to the U.S. meat packing industry. Journal of Agricultural Economics 41: 362–370CrossRefGoogle Scholar
  3. Azzam A., Lopez R. A., Liron-Espana C. (2002) Market power and/or efficiency: A structural approach. Review of Industrial Organization 20: 115–126CrossRefGoogle Scholar
  4. Bell D. D., Weaver W. D. (2002) Commercial chicken meat and egg production. Springer, New YorkGoogle Scholar
  5. Benabou R., Gertner R. (1993) Search with learning from prices: Does increased inflationary uncertainty lead to higher markups?. Review of Economic Studies 60: 69–94CrossRefGoogle Scholar
  6. Berry S. (1994) Estimating discrete-choice models of product differentiation. Rand Journal of Economics 25: 242–262CrossRefGoogle Scholar
  7. Berto Villas-Boas S. (2007) Vertical relationships between manufacturers and retailers: Inference with limited data. Review of Economic Studies 74: 625–652CrossRefGoogle Scholar
  8. Berry S., Levinsohn J., Pakes A. (1995) Automobile prices in market equilibrium. Econometrica 63: 841–890CrossRefGoogle Scholar
  9. Bhat C. R. (2003) Simulation estimation of mixed discrete choice models using randomized and scrambled Halton sequences. Transportation Research Part B: Methodological 37: 837–855CrossRefGoogle Scholar
  10. Bureau of Labor Statistics. US Department of Labor. (2008a). Producer Price Indexes. Retrieved September 2009, from http://www.bls.gov/ppi/.
  11. Bureau of Labor Statistics. US Department of Labor. (2008b). Wages by Area and Occupation. Retrieved September 2009, from http://www.bls.gov/bls/wages.htm.
  12. Cardell N. S. (1997) Variance components structures for the extreme value and logistic distributions with applications to models of heterogeneity. Econometric Theory 13: 185–213CrossRefGoogle Scholar
  13. Chintagunta P. K. (2002) Investigating category pricing behavior at a retail chain. Journal of Marketing Research 39: 141–154CrossRefGoogle Scholar
  14. Draganska M., Klapper D. (2007) Retail environment and manufacturer competitive intensity. Journal of Retailing 83: 183–198CrossRefGoogle Scholar
  15. Hendel I., Nevo A. (2006) Measuring the implications of sales and consumer inventory behavior. Econometrica 74: 1637–1673CrossRefGoogle Scholar
  16. Kim D. (2004) Estimation of the effects of new brands on incumbents’ profits and consumer welfare: The U.S. processed cheese market case. Review of Industrial Organization 25: 275–293CrossRefGoogle Scholar
  17. McFadden D. L. (1978) Econometric models for probabilistic choice among products. Journal of Business 53: S13–S29Google Scholar
  18. McFadden D. L., Train K. (2000) Mixed MNL models for discrete response. Journal of Applied Econometrics 15: 447–470CrossRefGoogle Scholar
  19. Nevo A. (2001) Measuring market power in the ready-to-eat cereal industry. Econometrica 69: 307–342CrossRefGoogle Scholar
  20. Pennsylvania State University. (1999). Agricultural alternatives: Small scale egg production college of agricultural sciences. University Park, PA.Google Scholar
  21. Richards T. J. (2007) A nested logit model of strategic promotion. Quantitative Marketing and Economics 6: 63–91CrossRefGoogle Scholar
  22. Rotemberg J., Saloner G. (1986) A supergame-theoretic model of price wars during booms. American Economic Review 76: 390–407Google Scholar
  23. Schroeter J. R. (1988) Estimating the degree of market power in the beef packing industry. Review of Economics and Statistics 70: 158–162CrossRefGoogle Scholar
  24. Sexton R. J. (2000) Industrialization and consolidation in the U.S. food sector: Implications for competition and welfare. American Journal of Agricultural Economics 82: 1087–1104CrossRefGoogle Scholar
  25. Slade M. E. (1995) Product rivalry with multiple strategic weapons: An analysis of price and advertising competition. Journal of Economics and Management Strategy 4: 445–476CrossRefGoogle Scholar
  26. Sudhir K. (2001) Structural analysis of manufacturer pricing in the presence of a strategic retailer. Marketing Science 20: 244–264CrossRefGoogle Scholar
  27. United States Department of Agriculture. (2008a). Foreign Agricultural Trade of the United States, from http://www.ers.usda.gov/Data/FATUS/.
  28. United States Department of Agriculture. (2008b). Agricultural Marketing Service. Retrieved September 29, 2009, from http://www.ams.usda.gov/AMSv1.0/.
  29. United States Department of Agriculture. (2008c). Economic Research Service. Food Availability (Per Capita) Data System. Retrieved November 3, 2008, from http://www.ers.usda.gov/Data/FoodConsumption.
  30. United States Department of Agriculture. (2009). Economic Research Service. Retrieved June 13, 2009, from http://www.ers.usda.gov/Data/MeatPriceSpreads/.
  31. Villas-Boas J. M., Winer R. S. (1999) Endogeneity in brand choice models. Management Science 445: 1324–1338CrossRefGoogle Scholar
  32. Villas-Boas J. M., Zhao Y. (2005) Retailers, manufacturers, and individual consumers: Modeling the supply side in the ketchup marketplace. Journal of Marketing Research 42: 83–95CrossRefGoogle Scholar
  33. Wilke, J. R. (2008). Egg industry probe is urged. Retrieved October 6, 2008, from http://online.wsj.com/article/SB122247846177681429.html#articleTabs%3Darticle.
  34. Wohlgenant M. K. (2001) Marketing margins: Empirical analysis. In: Gardner B. L., Rausser G. C. (eds) Handbook of agricultural economics. Vol. 1B, Amsterdam, North-Holland, pp 933–970Google Scholar

Copyright information

© Springer Science+Business Media, LLC. 2009

Authors and Affiliations

  1. 1.Morrison School of Management and Agribusiness, W. P. Carey School of BusinessArizona State UniversityMesaUSA

Personalised recommendations