Oligopsony Fed Cattle Pricing: Did Mandatory Price Reporting Increase Meatpacker Market Power?

Abstract

AbstractWe study beef packing margins before and after mandatory price reporting (MPR) was implemented in 2001 using a model that identifies and tests for switching between cooperative and non‐cooperative regime pricing. Our results show that after MPR took effect, the duration of non‐cooperative regimes was considerably shorter, while cooperative regimes were longer. Oligopsonistic rent, as measured by average economic profit, rose from $0.88/head in the 1990s to $2.59/head after 2001. While MPR is not likely the sole cause for such an increase, there was clearly more market power being exercised in fed cattle markets in the years after the program was implemented than before.