Power imbalances in French food retailing: Evidence from a production function approach to estimate market power

Abstract

We analyze whether an association of firms to the dominant oligopoly of food retail groups is related to higher oligopoly market power. We apply a production function approach for the estimation of firm-level markups to a sample of 3,366 French food retailers over the period 2006–2014. The results suggest the presence of power imbalances between firms of the dominant oligopoly and fringe firms. We also detect a positive connection between markups and profitability pointing to a reduction in consumer welfare due to retailers’ oligopoly market power.