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Concentration change and countervailing power in the U.S. food manufacturing industries

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Abstract

The purpose of this paper is to determine whether the countervailing power of grocery retailers has had a restraining influence on increases in seller market concentration in the U.S. food manufacturing industries. We empirically test this notion by examining changing four-firm concentration (ΔCR4) from 1967 to 1987 across 48 processed food product classes. Employing a model developed and tested by Venturini, we measure countervailing power of retailers with the share of market sales of private-label products.

For the 20-year period four variables were found to be significant determinants of ΔCR4. However, for the most recent 1977–1987 period, virtually no significant determinants are discovered. Unlike Venturini, no evidence of countervailing power could be detected in the 1980s and only weakly or rarely in the longer period. We suggest that the lax federal antitrust enforcement of the 1980s, measurement problems, or sampling criteria may be responsible for this unexpected outcome.

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Authors and Affiliations

  1. Department of Agricultural Economics, Purdue University, West Lafayette, Indiana, USA

    John M. Connor

  2. Department of Resource Economics, University of Massachusetts, Amherst, Massachusetts, U.S.A.

    Richard T. Rogers & Vijay Bhagavan

Authors
  1. John M. Connor
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  2. Richard T. Rogers
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  3. Vijay Bhagavan
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Connor, J.M., Rogers, R.T. & Bhagavan, V. Concentration change and countervailing power in the U.S. food manufacturing industries. Rev Ind Organ 11, 473–492 (1996). https://doi.org/10.1007/BF00157774

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