Empirical Analysis of Potential Oligopsony Power and Production Technology in the Ukrainian Milk Processing Industry under Conditions of Economic Transition

The objective of this study is to provide an empirical analysis of potential market power of the Ukrainian milk processing industry in the market for raw milk. The article is based on the New Empirical Industrial Organization (NEIO) approach and pays special attention to the production technology of the sector. In NEIO studies of market power in the food processing industry the production technology is typically assumed to be of a neoclassical type with simple properties like, e.g., constant returns to scale. Properties of this kind, however, are likely not to prevail in most transition countries of Eastern Europe because of serious distortions in factor usage mainly due to institutional deficiencies. Therefore, the analysis of this study is based on the more general representation of the production technology by a translog production function. The econometric model used to measure the degree of oligopsony power of the Ukrainian milk processing industry is estimated on the basis of monthly data. The model did not produce any evidence suggesting the exercise of market power by the milk processing industry in the estimation period from January 1996 to December 2003. This empirical result is consistent with the low operating rate of the Ukrainian milk processing industry and relatively small concentration ratio at the national level. However, it may be appropriate to conduct similar analyses on a regional level, since the concentration of milk processing plants and the structure of agricultural farms in the regions of Ukraine are quite different.milk processing industry, new empirical industrial organization (NEIO), oligopsony power, production technology, transition economy, Ukraine, Industrial Organization, Livestock Production/Industries,

Estimating the Degree of Buyers' Market Power: Evidence from the Ukrainian Meat Processing Industry

This study develops a structural market model for the econometric analysis of buyers’ market power in the Ukrainian meat processing industry, because there is some evidence that suggests that meat processors may excise market power in the agricultural market of slaughtered livestock. The estimation results did not produce any evidence suggesting the existence of buyers’ market power. Contrary to many other NEIO-studies, we extended the market structure market model by the three subsequent models. Using endogenously determined values for market power parameter, we found that meat processors concerning the buyers’ market for slaughtered livestock behave consistently with Cournot conjectures.Cournot competition, market power, meat processing industry, new empirical industrial organisation (NEIO), Ukraine, Livestock Production/Industries, Marketing,

Oligopsony Power in the Ukrainian Milk Processing Industry: Evidence from the Regional Markets for Raw Milk

Most of the studies based on the New Empirical Industrial Organization (NEIO) approach use the industry data to estimate the degree of market power at the national level. Yet, only a few empirical studies presented the results that measure the degree of market power at the regional level and found the existence of market power in the regional markets. While the fact is that there is an extensive evidence for the existence of potential oligopsony market power in the Ukrainian milk processing industry (price cartels and geographic market sharing among milk processing enterprises, interference of the state authorities, higher concentration on regional markets), the estimation results of the market structure model at the national level did not produce any evidence suggesting the exercise of oligopsony power (the estimated parameter of oligopsony power is close to zero and statistically insignificant). The objective of this study is to estimate the degree of oligopsony power in the regional market for raw milk. The estimation results of the market structure model at the regional level indicate the existence of oligopsony power in nine out of the twenty three regions of Ukraine.New Empirical Industrial Organization (NEIO); Oligopsony Power; Ukraine;

Impact of Corporate Ownership on Economic Performance of Agroholdings in Russia

This study conveys the impact of corporate ownership on economic performance of agroholdings – integrated agricultural, processing, marketing, financial and industrial business units in Russia’s agro-food sector. Using a unique database of the All-Russian Nikonov-Institute of Agrarian Problems and Informatics, we investigate 151 agroholdings in Russia and evaluate their economic performances for 2006. Applying the multiple linear regression analysis we were able to quantify corporate ownership and analyze a priori unobserved factors. The results of the econometric estimation reveal that state ownership exerts negative influence on the economic performance of agroholdings.Agroholding, Corporate Ownership, Performance, Russia, Agribusiness,

ECONOMETRIC ANALYSIS OF MARKET POWER ON THE UKRAINIAN MARKET FOR RAW MILK

The main emphasis of the present study is the empirical analysis of buyer market power of the Ukrainian milk processing industry on the market for raw milk. For an econometric analysis of pricing behaviour on the Ukrainian market for raw milk a sectoral, comparative-static structural model, based on the New Empirical Industrial Organization (NEIO) framework has been constructed. The model consists of a short-term supply function for raw milk and a first order condition for profit maximizing raw milk demand of the milk processing enterprises. The results of the econometric estimation of the model do not show any evidence for the existence of market power in the Ukrainian milk processing industry on the national level for the estimation period January 1996 to December 2003. However, these results do not exclude existence of market power on the regional level.Marketing,

Market power: Modeling issues and identification problems. An investigation of selected Hungarian food chains

In recent years increasing number of contractual arrangements in food chains are observed. There are several reasons for this phenomenon. Improving food quality often requires significant specific investments. Given high asset specificity, investors find it difficult to appropriate the returns on investment and thus have incentives to integrate. However, besides this transaction costs related argument, the ongoing vertical integration can result from structural developments in food chains which at different stages of the value chains, might hamper the proper functioning of markets. Using a unique, firm level dataset, in this paper we will focus on the latter issue. Due to its importance among various Hungarian value chains, we have selected the milk market. The objective is to conduct an analysis of market structure and pricing behaviour, with the main research question being the existence and significance of market power, its impact of factor allocation and the induced incentives for forward and backward integration. Several theoretical and empirical approaches including structural model estimation are applied in order to investigate whether market power is exploited or not. The empirical results are discussed against the background of several issues associated with the functioning of markets and a better understanding of institutional choice. Moreover, policy recommendation will be discussed.Market power, Hungarian food chains., Food Consumption/Nutrition/Food Safety,

Strategischer Wandel im ukrainischen Geflügelsektor: Vom Nettoimporteur zum Nettoexporteur

Mit Beginn der wirtschaftlichen Transformation in den 1990er Jahren ist die Produktion in der ukraini­schen Fleischindustrie stark zurückgegangen. Dies hatte zur Folge, dass die Ukraine noch bis Anfang 2010 ein Nettoimporteur von Fleisch und Fleischerzeugnissen einschließlich Geflügelfleisch blieb. Der einzige Bereich in der tierischen Veredelungswirtschaft, der den drastischen Zusammenbruch der Zentralverwal­tungswirtschaft überwinden und im letzten Jahrzehnt sogar ein exportorientiertes Wachstum verzeichnen konnte, ist die Geflügelwirtschaft. Damit stimuliert die Geflügelbranche gegenwärtig nicht nur die Ent­wicklung des ukrainischen Agrar-­ und Ernährungssektors, sondern auch der gesamten nationalen Wirt­schaft. Eine Reihe von Faktoren sind dabei von Bedeutung: Zum einen ist der Geflügelsektor wichtig für die nationale Ernährungssicherheit, da Geflügelfleischprodukte insbesondere für einkommensschwache Bevölkerungsgruppen die Hauptquelle für tierisches Eiweiß sind. Zum anderen verfügt der Sektor über eine hohe Exportkapazität mit entsprechenden Deviseneinnahmen und hat dank der ausreichenden Ver­fügbarkeit von einheimischem Getreidefutter (wie etwa Mais und Sojabohnen) einen wesentlichen Wettbe­werbsvorteil gegenüber der ausländischen Konkurrenz. Darüber hinaus bieten die im Vergleich zur Europäi­schen Union (EU) oder USA niedrigeren Arbeits-­, Material­- und Transportkosten zusätzliche Kostenvorteile. Gleichzeitig ermöglicht der gute Zugang zu internationalen Häfen am Schwarzen und Asowschen Meer Aussichten auf weitere Expansion

Oligopsony Power in the Ukrainian Milk Processing Industry: Evidence from the Regional Markets for Raw Milk

Most of the studies based on the New Empirical Industrial Organization (NEIO) approach use the industry data to estimate the degree of market power at the national level. Yet, only a few empirical studies presented the results that measure the degree of market power at the regional level and found the existence of market power in the regional markets. While the fact is that there is an extensive evidence for the existence of potential oligopsony market power in the Ukrainian milk processing industry (price cartels and geographic market sharing among milk processing enterprises, interference of the state authorities, higher concentration on regional markets), the estimation results of the market structure model at the national level did not produce any evidence suggesting the exercise of oligopsony power (the estimated parameter of oligopsony power is close to zero and statistically insignificant). The objective of this study is to estimate the degree of oligopsony power in the regional market for raw milk. The estimation results of the market structure model at the regional level indicate the existence of oligopsony power in nine out of the twenty three regions of Ukraine

Oligopsony Power in the Ukrainian Milk Processing Industry: Evidence from the Regional Markets for Raw Milk

Most of the studies based on the New Empirical Industrial Organization (NEIO) approach use the industry data to estimate the degree of market power at the national level. Yet, only a few empirical studies presented the results that measure the degree of market power at the regional level and found the existence of market power in the regional markets. While the fact is that there is an extensive evidence for the existence of potential oligopsony market power in the Ukrainian milk processing industry (price cartels and geographic market sharing among milk processing enterprises, interference of the state authorities, higher concentration on regional markets), the estimation results of the market structure model at the national level did not produce any evidence suggesting the exercise of oligopsony power (the estimated parameter of oligopsony power is close to zero and statistically insignificant). The objective of this study is to estimate the degree of oligopsony power in the regional market for raw milk. The estimation results of the market structure model at the regional level indicate the existence of oligopsony power in nine out of the twenty three regions of Ukraine

Market power on the edge? An analysis of the German and Hungarian hog markets Marktmacht auf der Kippe? Eine Analyse der deutschen und ungarischen Schweinemärkte

Abstract A structural market model is estimated to analyse the impact of market power on resource allocation in the German and Hungarian pork markets. The regression analyses suggest that market power exists, although on a relatively low level. Moreover, the estimates show that processors might pursue Cournot strategies. In addition, we observe that the market power of processors in the German hog sector is decreasing, while in the Hungarian sector it is increasing. These results are consistent with the structural developments in pork production and pork processing