Sanjib Bhuyan

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.

Impact of Vertical Mergers on Industry Profitability: An Empirical Evaluation

Vertical integration has become an important business strategy to respond to the needs of a consumer-driven marketing system. Although one of the perceived benefits of vertical ownership integration is improved profitability of the integrated firm, empirical literature mostly ignores this issue. Using a sample of U.S. food manufacturing industries, this study examines the impact of vertical mergers on profitability. Findings show that vertical mergers negatively impact profits. This may be due to the failure of vertical mergers to create differential advantages, such as cost savings, for the integrated firm.

An Evaluation of Consumer Willingness to Pay for Organic Produce in the Northeastern U.S.

Abstract Many factors have been found to affect the willingness to pay for reduced pesticide produce and organic produce. In most cases, gender and income are among the most significant determinants. In contrast to existing research, this paper incorporates new explanatory variables into the logit framework and focuses on the northeastern U.S. The results indicate that those who read labels when purchasing food have heard about integrated pest management produce, say that quality of fresh produce affects where they shop and are more likely to pay a premium for organic produce.

Corporate Political Activities and Oligopoly Welfare Loss

Businesses participate in political activities, suchas campaign contributions and lobbying, to influencepublic policy formulation and implementation. Usinga sample of U.S. food manufacturing industries, thisstudy measures the welfare impact of corporatepolitical activities in those industries. Empiricalanalysis shows that rent seeking was imperfect andcorporate political activities were higher in thoseindustries that were highly concentrated, large inemployee size and sales, and deeper in debt.

WELFARE LOSSES UNDER ALTERNATIVE OLIGOPOLY REGIMES: THE U.S. FOOD AND TOBACCO MANUFACTURING INDUSTRIES

This article systematically estimates the allocative efficiency losses in the U.S. food and tobacco manufacturing industries under alternative oligopoly pricing regimes using a formal model of oligopoly. Using 1987 data for 44 industries and an industry-wide oligopoly pricing scheme, these losses were estimated at approximately 3% of sales--2% in the food industries and 19% in the tobacco industries. Five additional oligopoly pricing regimes, four of which are price leaderships, are simulated and their results compared and tested relative to the industry-wide pricing regime. Findings underscore the importance of cost structure assumptions and that the impact of the type of oligopoly behavior assumed is not as dramatic when differences in demand and cost specifications are smoothed out.

Does Vertical Integration Effect Market Power? Evidence from U.S. Food Manufacturing Industries

The issue of whether vertical integration can raise market power is hotly debated because firms have a market power-related incentive to integrate vertically. Using a sample of U.S. food manufacturing industries, this “market power” motive is empirically tested in this study. Empirical analysis shows that forward vertical ownership integration (or vertical mergers) did not increase food manufacturers’ market power in the final product market. The study, however, shows that both market structure and conduct significantly influenced market power in the food industries.

What Determines Welfare Losses from Oligopoly Power in the Food and Tobacco Industries

This paper estimates welfare losses in thirty-eight U.S. food and tobacco industries at the four-digit SIC level, then relates such losses to market structure and conduct variables to identify the welfare loss determinants. Empirical findings indicate that these losses are higher in markets characterized by high export intensity, high advertising expenditures, economies of scale, mergers and acquisitions, and market concentration. In addition, losses are larger in industries that sell finished consumer products and face lower import competition.

Potential Applications for Shared-services Cooperatives in North Dakota

The principal goal of shared-services cooperatives is to capture savings through lower administrative costs, quantity purchasing discounts, sharing fixed costs, and assured levels of business with vendors and suppliers. Although the idea of cooperation is not new in North Dakota, the question raised here is whether there is potential applications for non-agricultural shared-services cooperatives that provide services that are absent or inadequate in rural communities in the state. It is concluded that there is potential application for shared-services cooperatives in both public and private sectors in North Dakota based on opportunities to share fixed costs and to capitalize on pecuniary economies of size.

Visiting an old battleground in empirical industrial organization: SCP versus NEIO

There are two principal approaches to analysing market power – the new empirical industrial organization (NEIO) approach and the structure–conduct–performance (SCP) approach. The existing literature on market power shows that there is no unanimous agreement on which of these two methods should be used to analyse the market power. Users seem to select whichever method is best suitable to their situation, such as data availability. Here we compare these two methods of analysing market power using a single US brewing industry data set and hypothesize that both the methods would yield identical results. On the basis of the empirical results, we conclude that the debate over the use of the SCP approach versus the use of the NEIO approach to analyse market power will continue.

Determinants of allocative efficiency losses from oligopoly power

This article quantifies the importance of market structure variables in determining the allocative efficiency losses from oligopoly power in the food and tobacco industries. Empirical findings indicate that these losses are likely to be higher in markets characterized by high R&D and advertising intensities, with highly concentrated sellers of consumer products facing lower import competition.