Oligopsony Power, Asset Specificity, and Hold‐Up: Evidence from the Broiler Industry

Abstract

In this article we look for empirical evidence of hold‐up in broiler industry production contracts by using the cross‐sectional national survey of broiler growers. First, we focus on the problem of under‐investment and hypothesize that the degree of agent's (grower's) under‐investment systematically depends on the principal's (integrator's) market power and the level of asset specificity. Second, we provide an indirect test of hold‐up by looking at the grower contract payoffs as a function of the frequency of the housing facilities upgrade requests and the principal's market power. The results show moderate empirical support for the presence of hold‐up.