Firm-level Forces Underlying Concentration in Agriculture

Although industry concentration in agriculture has a long history, the analysis of concentration and normative recommendations on it are a source of ongoing controversy in agricultural economics. The received approaches to the study of industry concentration are based on the structure-conduct-performance model or on the “new” empirical industrial organization literature which explicitly models competitive behaviour. However, each of these approaches wants for analysis of the specific firm-level decision processes that produce its predicted outcome. An alternative approach is to analyze the internal motivations for vertical and horizontal integration that exist within firms and that ultimately result in market concentration. From this perspective, market concentration results from more than simply competition among firms for economic rents