Milking the Milkers: a Study on Buyer Power in the Dairy Market of Peru
Abstract
The literature on imperfect competition suggests the existence of two conditions facilitating the exercise of buyer market power: the existence of an inelastic and upward-sloping
supply, and the existence of high concentration in purchases. In this study, we use monthly
aggregate data (from 1999-2014) of the raw milk market in Peru. We test whether those
conditions hold, by analyzing the market and estimating the supply elasticity. Our findings suggest the existence of buyer power in raw milk market since an inelastic raw milk
supply and a highly concentrated market is verified. Our assessment is reinforced with
the role played by the existing market power of the firms at the downstream segment and
the existence of entry barriers in that market segment.
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Documento de trabajo; 470
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