Rigoberto A. Lopez

Oligopoly Power in the Food and Tobacco Industries

In this article we estimate and test for the degree of oligopoly power and economies of scale in forty food and tobacco industries using the New Empirical Industrial Organization (NEIO) framework and four-digit SIC data. Lerner indices and elasticities of scale are compared throughout the entire food and tobacco industries. T-tests verify that all but three of these industries exert statistically significant degrees of oligopoly power and that over 82% of these industries exhibit nonconstant returns to scale. The empirical results also provide estimates of the price elasticities of demand for each industry.

Market Power and/or Efficiency: A Structural Approach

This article separates oligopoly-power and cost-efficiency effects ofchanges in industrial concentration and assesses their impact on output prices in 32 food-processing industries. Empirical results indicate that although concentration inducescost efficiency in one-third of the industries, oligopoly-power effects either dominate cost efficiencyor reinforce inefficiency, resulting in higher output prices in most industries. The articlealso provides fresh econometric estimates of oligopoly power and economies of size for the industriesin question.

Political Economy of U.S. Sugar Policies

This article examines political-economic decision making with respect to U.S. sugar policies. It evaluates the responsiveness of target prices and import quotas levels to changes in (a) the economic surpluses of market participants and (b) the federal budget deficit. Results indicate a weak linkage between sugar producer surplus and subsequent target prices levels but a strong linkage between the federal budget deficit and subsequent import quota levels. The influences of sugar users, corn sweetener producers, and foreign countries are also examined.

The determinants of location choices for food processing plants

This article examines the determinants of location choices for new food processing plants using the results of a telephone survey. Six categories of business climate factors (market, infrastructure, labor, personal, environmental regulation, and fiscal policy) containing 41 specific location factors are considered. The survey responses are analyzed in their entirety, by types of raw products processed, and by plant size. Findings indicate that plant location choices are driven by market and infrastructural factors. Fiscal policies such as tax and development incentives are insignificant. Implications of the findings for devising incentive packages to attract new plants are given.

Brand-Supermarket Demand for Breakfast Cereals and Retail Competition

The Berry, Levinsohn, and Pakes (1995) market equilibrium model is extended to the supermarket chain level to examine consumer choices and retail competition for thirty-seven brands of breakfast cereals in Boston. Estimated taste parameters for product characteristics vary significantly across consumers. Although consumers are price-sensitive with respect to their chosen cereals, they exhibit strong brand and supermarket loyalty. Retail markups increase and marginal costs decrease with grocery market shares, attesting to oligopoly power with efficiencies. Markups decrease with the own-price elasticity of demand, with Corn Flakes having the highest markups. A detailed picture of consumer response and supermarket competition is provided.

Food Protection for Sale

This article tests the Protection for Sale (PFS) model using detailed data from U.S. food processing industries from 1978 to 1992 under alternative import demand specifications. All empirical results support the PFS model predictions and previous empirical work qualitatively. Although welfare weights are very sensitive to import demand specification, a surprising result is that we obtain weights between 2.6 and 3.6 for domestic welfare using import slopes or elasticities derived from domestic demand and supply functions. In contrast, results based on import slopes or elasticities from directly specified import demands (including the Armington model) yield the usual, unrealistically large estimates for the domestic welfare weight. We contend that the latter empirical paradox arises mainly because the explanatory variables tend to be extremely large for industries with low import ratios and/or low estimated elasticities or slopes resulting from relatively volatile import prices. The results with derived import parameters point to a much stronger role of campaign contributions within the PFS model than previously found. They also suggest that the commonly-used Armington estimates may not be appropriate for estimating the PFS model.

Determinants of oligopsony power: The Haitian coffee case

Abstract This paper investigates the determinants of oligopsony power exerted by coffee exporters in Haiti. It develops and estimates a two-equation model with cross-parameter restrictions: one equation for the Lerner index of oligopsony and the other for the residual supply function facing exporters. Empirical results indicate that both institutional arrangements and domestic market conditions have significantly shaped oligopsony power.

The Structure of Government Intervention in African Agriculture

This article examines the determinants of various rates of agricultural subsidies (output, input, exchange rate distortions, and aggregate) using commodity-level data from eight African countries in the 1980s. Econometric results indicate that structural adjustment policies were more effective in reforming exchange rate distortions than in liberalising commodity markets. Output policies are determined within the national context while input subsidies are more responsive to commodity-specific conditions. Further-more, agricultural subsidies were strongly influenced by the degree of urbanisation and by the number of people per unit of arable land in a manner consistent with cheap food policy strategies.

Competition Effects of Supermarket Services

This article investigates the competition effects of supermarket services using fluid milk as a case study. A simultaneous equation model for services and price competition is estimated with scanner data from fifteen supermarket chains using two alternative measures of services, namely store size and principal components of in-store services. Empirical results show that increasing services results in economies of scope, greater supermarket chain-level demand, lower price elasticity of demand, and enhanced market power, leading to higher milk prices and quantity sold. We conclude that, as result of service competition, supermarkets differentiate themselves from competitors and successfully attract less price-sensitive consumers. Copyright 2007, Oxford University Press.

Demand for carbonated soft drinks: implications for obesity policy

This article examines consumer choices of Carbonated Soft Drinks (CSDs) and their implications for obesity policy. Demand in relation to product and consumer heterogeneity is estimated via a random coefficients logit model (Berry et al., 1995) applied to quarterly scanner data for 26 brands in 20 US cities, involving 40 000 consumers. Counterfactual experiments show that caloric taxes could be effective in decreasing caloric CSD consumption though having little impact on obesity incidence.