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New Empirical Industrial Organization and the Food System: Summary

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Abstract:

This book presents a detailed, systematic overview of the new empirical industrial organization (NEIO) framework and numerous case studies of the application of this approach to the food sector, illustrating the usefulness of the NEIO approach in measuring market power. The primary contribution of the NEIO framework to industrial organization is the generalization and extension of conventional perfect-competition and monopoly models to intermediate imperfect-competition models that can be empirically estimated. Since the majority of markets in the real world are neither perfectly competitive nor monopolistic, the NEIO framework is valuable in empirical applications. Indeed, many researchers have used this approach to measure and analyze the degree of market imperfection in various industries, with the bulk of the studies focusing on the food industry.

In Chapter 1, we present an extensive overview of NEIO. We provide a brief review of various theories and schools of thought for industrial organization (IO) and how NEIO fits into the field of IO. In the detailed discussion, we divide the NEIO models into two broad categories: quantity-setting homogeneous oligopoly, which is a generalization of the Cournot model, and price-setting product-differentiated oligopoly, which is a generalization of the Bertrand model.

In the quantity-setting homogeneous oligopoly section, we discuss the basic theory of NEIO, examine consistency of conjectures and rationality of Cournot behavior, generalize the Dorfman-Steiner Theorem, examine the two interpretations and two estimation approaches for conjectural variations, present a framework for measuring economic welfare losses due to oligopoly, look at the NEIO framework for measuring oligopsony power on the part of processors, review a framework for investigating the market power of farmer cooperatives, construct a framework for analyzing bilateral oligopoly in the food market channel, and apply the NEIO framework to price transmissions under imperfect competition, spatialequilibrium analysis, and international trade issues.

Document Type: Research Article

Publication date: January 1, 2006

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