Do Chinese dairy firms have market power? an estimation of market power with price heterogeneity

Guo, Qing; Wang, H. Holly; Chen, Yongjun

doi:10.1108/caer-03-2015-0021

Cited by 10 publications

(10 citation statements)

References 23 publications

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“…We also add the time trend variable for the robustness test, and the estimation results are almost the same. Our research is in line with our previous work on the fluid milk sector (Chen & Yu, 2019; Dai & Wang, 2014; Guo et al, 2016), which further confirms our estimation is robust and consistent.…”

Section: Resultssupporting

confidence: 92%

Estimating market power for the Chinese fluid milk market with imported products

Chen

2021

Agribusiness

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Market power exercised by large dairy brands is an important policy concern in China, while imported milk players have not received enough attention. In this paper, we construct a New Empirical Industrial Organization (NEIO) model to estimate the market powers of fluid milk products. Our results indicate the Chinese fluid milk market is imperfectly competitive where the top three domestic brands own strong market power, but there is no evidence to justify the existence of market power for the imported milk. It might be due to the high price elasticity of demand, inefficient sales channels, and entry barriers of imported fluid milk. In terms of policy implications, the government needs to create a more competitive market for the whole dairy industry. Overseas suppliers also need to improve their competitiveness by optimizing their sales network and enhancing consumers' brand loyalty. [EconLit Citations: Q13, L66, L52].

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Section: Resultssupporting

confidence: 92%

Estimating market power for the Chinese fluid milk market with imported products

Chen

2021

Agribusiness

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“…Lastly, cross‐price elasticities are positive with only two exceptions (Danone and Mengniu in Guangzhou, and Danone and Yili in Shenzhen), and this suggests different brands of yogurt are largely substitutes, which supports previous finding that the dairy industry in China is quite competitive (Guo et al . 2016).…”

Section: Resultsmentioning

confidence: 99%

Effects of local and national advertising across brands: the case of yogurt in China

Chen

Zhou

2020

Aus J Agri & Res Econ

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This study examines Chinese consumer's demand for yogurt and evaluates the effect of advertising on yogurt demand in four first-tier cities in China. An almost ideal demand system augmented with advertising is estimated, and advertising on local media channels is distinguished from that on national media channels. The main findings are that Chinese demand for yogurt is generally elastic, yet local brands tend to have smallest own-price elasticities. More importantly, while local advertising has generally a positive effect on yogurt demand, national advertising is found to decrease demand in Beijing and Guangzhou. This may be due to households' distinct media preference across cities, as well as advertising cannibalisation within brand. Lastly, advertising one yogurt brand may function similarly as generic advertising in promoting demand for yogurt with other brands. Corresponding marketing implications are drawn for yogurt manufacturers and marketers.

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“…Zhuang and Abbott, 2007; Tan and Zapata, 2014). In addition, demand of pork is found to be relatively stable with strong income effects in China (Guo et al , 2016). Nonetheless, all of the studies examined here either used reduced-form models or rather outdated data.…”

Section: Chinese Pork Industrymentioning

confidence: 99%

“…The presence of market power is most often a characteristic of mature oligopolistic industries, where demand is relatively stable, the rate of innovation is minimal to moderate, and economies of scale – and therefore consolidation – offer the most promising source of increasing revenue and profits (Howard, 2016). While the Chinese pork industry is still underdeveloped, most of these characteristics have already been observed and discussed in the literature (Weldegebriel et al , 2012; Wang et al , 2014; Guo et al , 2016; Chen and Yu, 2018; Dai et al , 2018; Ma et al , 2019). Nonetheless, questions remain unanswered regarding the interplay between the pork and hog industries.…”

Section: Introductionmentioning

confidence: 99%

Estimating market power in the Chinese pork-packing industry: a structural approach

Lan

Wang

2019

CAER

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Purpose The purpose of this paper is to investigate market power in the Chinese pork supply chain. The authors aim to explain why a steady rise in prices is observed in the sector, apart from existing evidence on incomplete/asymmetric cost pass-through and concerns of growing concentration and consolidation in the sector. Design/methodology/approach This study uses a new empirical industrial organization model for both oligopoly and oligopsony power to measure the degree of market power exerted on consumers and hog farmers simultaneously. Findings By examining annual panel data across provinces in China, the authors find that both oligopoly and oligopsony powers exist in the pork supply chain. In particular, the authors determine that a higher degree of market power is found to influence prices paid to hog farmers than prices paid by pork consumers. Estimates of key elasticities in the Chinese pork supply chain are also updated based on the structural model estimation and the latest data. Research limitations/implications Due to the lack of data at a more granular level of geography, the authors are only able to estimate market power by three major economic regions. Practical implications The findings provide useful information for future policy analyses of Chinese food markets. First, the pork-packing industry should be of great concern in terms of market power and its influence on consumers’ and farmers’ welfare. It is essential to take into consideration market power in the pork supply chain before making any public policy regarding the pork market. Furthermore, following economic theory and experience from developed countries, large meat packers will eventually vertically control hog farmers given their stronger oligopsony power over the upstream. Vertical integration may be the next important issue in terms of food market competition. Finally, the results may also draw the government’s attention to investigating market competition in all major food markets. Originality/value The empirical evidence draws attention to the issue of food market competition in one of the largest and most important meat-packing markets in China. The authors hope to encourage further discussions on pork and hog market regulations and related public policies.

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Do Chinese dairy firms have market power? an estimation of market power with price heterogeneity

Cited by 10 publications

References 23 publications

Estimating market power for the Chinese fluid milk market with imported products

Estimating market power for the Chinese fluid milk market with imported products

Effects of local and national advertising across brands: the case of yogurt in China

Estimating market power in the Chinese pork-packing industry: a structural approach

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