Lloyd, Tim, McCorriston, Steve, Morgan, C. W., Rayner, A. J. and Weldegebriel, Habtu Tadesse (2009) Buyer power in U.K. food retailing: a 'first-pass' test. Journal of Agricultural & Food Industrial Organization, Vol.7 (No.1). Article 5. doi:10.2202/1542-0485.1253

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Abstract

Habtu Weldegebriel, University of Warwick
Abstract
The potential existence of buyer power in U.K. food retailing has attracted the scrutiny of the U.K.'s anti-trust authorities, culminating in the second of two comprehensive regulatory inquiries in recent years. Such inquiries are authoritative but correspondingly time-consuming and costly. Moreover, detection of buyer power has been dogged by the paucity of reliable evidence of its existence. In this paper, we present a simple theoretical model of oligopsony which delivers quasi-reduced form retailer-producer pricing equations with which the null of perfect competition can be tested using readily available market data. Using a cointegrated vector autoregression, we find empirical results that show the null of perfect competition can be rejected in seven of the nine food products investigated. Though not conclusive on the existence of buyer power, the proposed test offers a means via which the behaviour of the retail-producer price spread is consistent with it. At the very least, it can corroborate the concerns of the anti-trust authorities as to whether buyer power is potentially one source of concern.

Item Type:	Journal Article
Subjects:	H Social Sciences > HF Commerce
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Purchasing power -- Great Britain, Antitrust law -- Great Britain, Food prices -- Great Britain, Food industry and trade
Journal or Publication Title:	Journal of Agricultural & Food Industrial Organization
Publisher:	Berkeley Electronic Press
ISSN:	1542-0485
Official Date:	25 May 2009
Dates:	Date Event 25 May 2009 Published
Volume:	Vol.7
Number:	No.1
Page Range:	Article 5
DOI:	10.2202/1542-0485.1253
Status:	Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Nuffield Foundation (NF)
Grant number:	SGS/00961/G (NF)

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