Meatpacker Conduct in Fed Cattle Pricing: Multiple-Market Oligopsony Power

The exercise of market power in multiple geographic fed cattle markets is measured with an econometric model which links behavior of the margin between boxed beef and regional fed cattle prices to an economic model of oligopsony conduct in multiple markets. A game theoretic economic model suggests that for market power to be exercised in a single market a discontinuous pricing strategy must be followed. Total market power is enhanced if meatpackers coordinate pricing across geographic markets. Tests reject independence of pricing conduct across geographic markets which suggests multiple-market market power is nt. However, the magnitude of the market power is small and has decreased between the early and late 1980s