Oligopoly Power And Advertising In The North American Beef Industry (original) (raw)

To capture the potential for oligopoly power across Canadian and U.S. cattle processing sectors, a conjectural variations model is developed that incorporates trade of cattle and beef between Canada and the U.S.. The model differs from previous work since Canadian and U.S. beef • processing sectors are treated as one. Moreover, the model reflects that Canada takes U.S. prices as given, but that a feedback mechanism allows for beef and cattle trade to influence these spatial price relationships. Thus, the measure of oligopoly power is for North America and not just for Canada or the U.S. separately. In addition, brand and generic advertising in Canada and the U.S. are included as explanatory variables in the conjectural variations equation. Empirical results indicate that, North American cattle processor's conjectural elasticity averaged 0.038, while the Lerner Index averaged 0.125. Further more, generic advertising significantly increased the conjectural elasticity, while brand advertising significantly reduced the conjectural elasticity. Implications of these results are discussed.

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