MEASURING OLIGOPOLY POWER AND PRODUCTION RESPONSES OF THE CANADIAN FOOD PROCESSING INDUSTRY

Abstract

This study is concerned with the measurement of factor demand responses and other production characteristics of the food processing industry in Canada. An important feature of the study is that it allows for non‐competitive behaviour of the industry and thus permits an estimation of the degree of oligopoly power. The major results of the study are that the hypothesis of (output) price‐taking behaviour is statistically rejected and that the average degree of oligopoly power is significant. Moreover, the industry appears to be quite responsive to changes in the factor price structure. Labour and energy are the most responsive inputs while raw food materials and capital show substantially less sensitivity to price variations.