Measuring market power for food retail activities: French evidence

In this paper we develop and estimate an empirical model of pricing behavio ur for food retail firms in both a quantity-setting oligopoly engaged in th e joint production of demand-related final goods and a quantity-setting oli gopoly for supply-unrelated wholesale goods. The procedure consists of esti mating an inverse demand system for the final goods, single supply function s for the wholesale goods and the retail industry first-order profit-maximi sation conditions, from which an estimate of the degree of imperfect compet ition and of oligopoly-oligopsony power for the different commodities can b e retrieved. The model is applied to the French food retail industry and th ree commodities are distinguished: dairy products, meat products and other food products. We strongly reject the hypothesis that French food retail fi rms behave competitively, and more than 20 and 17 per cent of the wholesale -to-retail price margins for dairy products and meat products, respectively , can be attributed to oligopoly-oligopsony distortions.