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European Review of Agriculture Economics Vol 27 (3) (2000) pp.347-364
© 2000 Oxford University Press and the Foundation for the European Review of Agricultural Economics

Oligopsony power with uniform spatial pricing: theory and application to milk processing in Spain

AM Alvarez, EG Fidalgo, RJ Sextonz and M Zhangz

Universidad de Oviedo, Oviedo, Spain
z University of California, Davis, CA, USA

Summary

This study presents a conceptual and empirical analysis of buyer oligopsony power in a spatial markets setting. The conceptual model analyses behaviour in a market with uniform spatial prices and Löschian conduct. A key result is that firms may set prices above the monopsony level to minimise direct competition among themselves. The empirical analysis focuses on the purchase of milk in the Asturias region of Spain and utilises a panel of firm-level data to study the determinants of milk processors' pricing behaviour. Estimation results strongly support the predictions of the theoretical model.

Keywords: oligopsony, uniform pricing, spatial competition, milk processing


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