Measuring market power in multi-product oligopolies: the US meat industry

Abstract

This paper develops and estimates an economic model for measuring market power in a quantity-setting oligopoly engaged in the joint production of demand-related goods. The model, which allows for firms' conjectures about both same and cross-market responses to own output variation, is applied to the US meat (beef and pork) industry. He hypothesis that the industry's equilibrium reflects price taking behaviour is rejected. The hypothesis of no cross effects cannot be rejected. Roughly, half of the farm-to-retail price spreads for beef and pork appear to be attributable to market power.