This paper incorporates inventory dynamics into a standard conjectural variations analysis of market power. Using a model which incorporates closed-loop equilibrium strategies, we show that measures of market power that ignore inventory dynamics are biased. We then apply the model to the beef-packing industry using annual data on cattle stocks, slaughter and prices from 1933-1999. Our estimates suggest that static measures overestimate the amount of market power exerted by beef-packing firms.
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Inventory Constraints in a Dynamic Model of Imperfect Competition: An Application to Beef Packing
Lynn Hunnicutt / David Aadland
1Department of Economics, Utah State University, Logan, Utah, USA
1Department of Economics, Utah State University, Logan, Utah, USA
Citation Information: Journal of Agricultural & Food Industrial Organization. Volume 1, Issue 1, Pages –, ISSN (Online) 1542-0485, DOI: 10.2202/1542-0485.1023, March 2003
Publication History:
- Published Online:
- 2003-03-27
Keywords: market power; conjectural variations; inventory dynamics
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