Oligopoly Power in the Food and Tobacco Industries

Abstract

Abstract 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.