Estimating the degree of market power in the vegetable market in Japan

Abstract

To adequately capture the market structure of vegetables in Japan, it is necessary to develop an oligopolistic model due to the potential market power of producers vs. retailers. We first estimate the market power between producers and retailers by extending the bilateral oligopoly model. Next, we evaluate the role of the wholesale market and its effect on economic welfare. Our results indicate that the wholesale market benefits both producers and consumers through a reduction in retail margins. This study contributes to the industrial organization literature by developing a bilateral oligopoly model and empirically measuring the wholesale market system in Japan.