Estimating market power for the Chinese fluid milk market with imported products

Abstract

AbstractMarket power exercised by large dairy brands is an important policy concern in China, while imported milk players have not received enough attention. In this paper, we construct a New Empirical Industrial Organization (NEIO) model to estimate the market powers of fluid milk products. Our results indicate the Chinese fluid milk market is imperfectly competitive where the top three domestic brands own strong market power, but there is no evidence to justify the existence of market power for the imported milk. It might be due to the high price elasticity of demand, inefficient sales channels, and entry barriers of imported fluid milk. In terms of policy implications, the government needs to create a more competitive market for the whole dairy industry. Overseas suppliers also need to improve their competitiveness by optimizing their sales network and enhancing consumers' brand loyalty. [EconLit Citations: Q13, L66, L52].