Testing for Market Power in the Australian Grains and Oilseeds Industries

Abstract

<p>We formally assess competitive buying and selling behavior in the Australian grains and oilseeds industries using a more realistic empirical model and a less aggregated data set than previously available+ We specify a duality model of profit maximization that allows for imperfect competition in both input and output markets and for variable-proportions technologies+ Aggregate input-output data are used to define the structure of the relevant industries, and time series data are then used to implement the model for 13 grains and oilseeds products handled by seven groups of agents+ The model is estimated in a Bayesian econometrics framework+ We find evidence of flour and cereal food product manufacturers exerting market power when purchasing wheat, barley, oats and triticale; beer and malt manufacturers exerting market power when purchasing wheat and barley; and other food product manufacturers exerting market power when purchasing wheat, barley, oats and triticale.</p>