Detecting Market Power Along Food Supply Chains: Evidence and Methodological Insights from the Fluid Milk Sector in Italy

• Main Author: Daniele Cavicchioli
• Format: Article
• Language: English
• Published: MDPI AG 2018-12-01
• Series: Agriculture
• Subjects: conduct screening; oligopoly; oligopsony; price transmission; vertically related markets
• Online Access: https://www.mdpi.com/2077-0472/8/12/191

Concerns about the functioning of food supply chains have been raised by the European Commission over past years, calling for more effective and coordinated action by National Competition Authorities (NCAs). To fill this knowledge gap, an equilibrium displacement model is used to screen conduct along the supply chain, combining the advantages of asymmetric price transmission (APT) studies and structural models. The test was carried out on the Italian fluid milk supply chain following market monitoring action by the NCA. Three periods (1996⁻2003; 2000⁻2008 and 1996⁻2008) have been examined, finding imperfect competition over 1996⁻2008 and 2000⁻2008, while no conclusions may be drawn over the time span 1996⁻2003. In the testing process, the model’s peculiarities and certain limitations emerged, and related suggestions for its improvement are discussed. This approach may be used as a preliminary “fast„ test for competition policy screening, as a complement to other methodologies. However, further theoretical and empirical model validation is necessary.