Measuring the Degree of Oligopsony Power in the Beef Packing Industry in the Absence of Marketing Input Quantity Data

Abstract

We develop a model to measure the degree of oligopsony power in the beef packing industry, while accommodating variable proportions technology, that can be estimated with fewer data requirements. In particular, nonspecialized input quantities, which are often not available, are not needed. Through application of the envelope theorem, we show that the relationship between value marginal product and marginal factor cost can be defined over the prices of the nonspecialized inputs rather than their corresponding quantities. When applied to the beef packing industry, we find no evidence of oligopsony power over our 1967-93 sample period.

Keywords

• beef industry
• envelope theorem
• oligopsony power
• variable proportions