Causal loop diagrams to systematically analyze market power in the Belgian sugar value chain

Katharina Biely,Erik Mathijs,Steven Van Passel

doi:10.3934/agrfood.2019.3.711

Katharina Biely, Erik Mathijs + Show 1 more

Open Access

https://doi.org/10.3934/agrfood.2019.3.711

Copy DOI

Abstract

It has been acknowledged that power is a fundamental aspect that needs to be considered when performing a value chain analysis. The structure of the value chain is indicative of the power distribution along the chain. By employing systems thinking the structure of the value chain can be further investigated and inferences on market power issues can be made. This novel approach connects value chain research with insights from Industrial Organization (IO) literature. Depending on the case, market power may not be measurable by traditional economic tools. Systems thinking offers an alternative tool, allowing the employment of qualitative and quantitative data, overcoming drawbacks of IO methods and providing more depth to value chain analysis. In this paper the valuable contribution of systems thinking to market power analysis is exemplified by the Belgian sugar beet case. The analysis showed that transportability and perishability of sugar beet are key causes of market failure in the Belgian sugar value chain. Systems thinking can support understanding potential future behavior of the market based on the thorough understanding of the current market structure. We illustrate how to integrate factors determining the market structure into causal loop diagrams. This novel approach allows a comprehensive evaluation and thus opens up market power analysis to interdisciplinary research.

Highlights

The increasing concentration in the agro-food system is a process captured by the corporate food regime
The analysis showed that transportability and perishability of sugar beet are key causes of market failure in the Belgian sugar value chain
Our analysis focuses on the farm level, so we aimed at understanding the situation of the farmer within given circumstances

Summary

Introduction

The increasing concentration in the agro-food system is a process captured by the corporate food regime (which can be subsumed under the third food regime [1]). Market power estimations are often based on the market concentration. Empirical studies provide mixed results regarding the adverse effects of market concentration [3]. Market share alone may not be a sufficient condition for exerting market power. Competition among a few large companies might still not allow to charge a mark-up. Concentration at one point of the value chain may be counterbalanced by concentration up and / or downstream the value chain, as the example of this case study will show. The identification of market concentration depends on the market definition [4]. Due to the lack of data market power is often hard to estimate [5]

Methods

Results

Discussion

Conclusion