Empirical “first-filter” test for the existence of buyer power in the Finnish food supply chain

Authors

• Jyrki Niemi Natural Resources Institute Finland (LUKE) Economic and Society Research Unit
• Xing Liu Natural Resources Institute Finland (LUKE) Economic and Society Research Unit

DOI: https://doi.org/10.23986/afsci.53275

Keywords:

concentration, market power, VECM

Abstract

Buyer power and competition policy in food supply chains has emerged as an important economic issue and a highly sensitive item on the policy agenda around the world. In Finland, the increasing concentration of the distribution sector and processing industry has raised concern over the existence and gradual growth of buyer power in these sectors. The purpose of this paper is to investigate the possible existence of buyer power in the Finnish food supply chain. More specifically, we follow an approach used by Lloyd et al. (2009) to measure oligopsony power among the Finnish food industry and retailers against farmers. The results suggest that the spread between producer and retailer prices in Finland is not consistent with perfectly competitive behaviour, and might thus be caused, at least as a candidate amongst other factors, by the existence of oligopsony power in the Finnish food supply chain.