Tomatoes, Technology, and Oligopsony

Abstract

This paper draws on the theory of monopsony and oligopsony to develop an empirical test for the presence of the market power where an exogenous shock on the relevant market may be observed. An application of this test is demonstrated for the tomato processing industry, where the exogenous shock is created by the introduction of mechanical harvesting technology. The results are remarkably consistent with oligopsonistic dominant firm-price leadership. Statistical tests suggest rejection of the null hypothesis of competition.