Abstract:
The purpose of this study was to investigate dairy processors market power in Iran. For
this purpose, the dynamic imperfect competition model, in which processors are allowed
to exert market power in both downstream (selling dairy products) and upstream (b
uying
raw milk from dairy farmers) was applied. Market power parameters, dairy products
demand, and raw milk supply elasticities were jointly estimated in a system of equations
including market margin, dairy demand, and raw milk supply equations by none li
near
estimation technique. Data for the period 1992 to 2012 on the industry level were used for
estimating an empirical version of the model.
The result indicated that conjectural
elasticities values were a departure from zero, which reflected non
-
competit
ive behavior
in dairy market and in raw milk market specifically. Among three dairy products
including pasteurized milk, yogurt, and cheese, the conjectural elasticity was the highest
for the pasteurized market and the lowest for yogurt
.
The result suggest
s that dairy
industries processors exercise marketing power in the downstream and upstream market
in the dairy products supply chain. Therefore, policymakers must make appropriate
policy for facilitating entrance conditions for new dairy processors and imp
rove farmers’
marketing cooperative so as to have more competitive raw milk price
