Ramon Franquesa

Testing for market power in the Spanish meat market: price transmission elasticity and asymmetry using econometric models

This paper pays attention to the Spanish fresh meat market, by analysing how the different stages of the market chain interact and so, investigating the presence of market power. In this paper, we use weekly data for the period 2005-2007, to examine the presence of market power in the meat market. In particular, we analyse the price transmission elasticity and the price transmission asymmetry for fresh beef, pork, lamb, chicken, rabbit and eggs between the farm and retail market stages in Spain. Price causality analysis confirms that, in the short run, upstream level (producer) led to changes in the downstream level (retail). Furthermore, for all products it can be observed that when the producer price decreases, the retail price decreases less than proportional; hence, the retail price increases less than proportional. Therefore, market power does not seem to explain this asymmetry, because the second behaviour contradicts the market power perception. Therefore, it seems that lower volatility in the retail market stage – which may be due to the higher number of available substitutes and sources and higher repricing costs – explains the asymmetric price transmission.