Increasing concentration in food processing has important economic implications for agricultural producers and consumers. This paper addresses the issue by focusing on a case where pure monopsony conditions appear to hold–catfish processing in West Alabama. Farm-level impacts of the market power imbalance are described via a six equation theoretical model. Results show price elasticity of farm supply governing the economic incentive to the processor for exploiting its market power: less (more) elastic supply implies greater (lesser) divergence between competitive and monopsony price. The theoretical model is operationalized using an indirect procedure recently suggested by Houck for estimating farm level supply elasticities. Based on these supply elasticities and historical prices, the model predicts a 12-35 percent potential reduction in prices received by West Alabama producers as a result of market power imbalance.

This article systematically estimates the allocative efficiency losses in the U.S. food and tobacco manufacturing industries under alternative oligopoly pricing regimes using a formal model of oligopoly. Using 1987 data for 44 industries and an industry-wide oligopoly pricing scheme, these losses were estimated at approximately 3% of sales~2% in the food industries and 19% in the tobacco industries. Five additional oligopoly pricing regimes, four of which are price leaderships, are simulated and their results compared and tested relative to the industry-wide pricing regime. Findings underscore the importance of cost structure assumptions and that the impact of the type of oligopoly behavior assumed is not as dramatic when differences in demand and cost specifications are smoothed out.

Under the North American Free Trade Agreement (NAFTA) tariffs on U.S. potato imports to Mexico were phased out by 1993. Citing phytosanitary issues, in 1996, the Mexican government placed quantitative restrictions on U.S. potato imports and restricted their import only to designated border areas. This article estimates the welfare cost of restricting U.S. potato imports into Mexico. We find that removing trade restrictions may lead to over 1.8 million tons of new imports into Mexico, a gain of consumer surplus of 4.0 billion pesos per year, and a loss of 2.9 billion pesos of producer surplus.