Abstract

This paper incorporates inventory dynamics into a standard conjectural variations analysis of market power. Using a model which incorporates closed-loop equilibrium strategies, we show that measures of market power that ignore inventory dynamics are biased. We then apply the model to the beef-packing industry using annual data on cattle stocks, slaughter and prices from 1933-1999. Our estimates suggest that static measures overestimate the amount of market power exerted by beef-packing firms.

Submitted: January 13, 2003 · Accepted: March 21, 2003 · Published: March 27, 2003

Recommended Citation

Hunnicutt, Lynn and Aadland, David (2003) "Inventory Constraints in a Dynamic Model of Imperfect Competition: An Application to Beef Packing," Journal of Agricultural & Food Industrial Organization: Vol. 1 : Iss. 1, Article 12.
DOI: 10.2202/1542-0485.1023
Available at: http://www.bepress.com/jafio/vol1/iss1/art12