A Simple Test of Oligopsony Behavior with an Application to Rice Milling

While the development of empirical models of seller conduct abound, arguably less attention has been paid to the development of empirical models of buyer conduct. This is especially problematic in studies of food and agricultural industries where high buyer concentration along the supply chain is the norm. The purpose of this paper is to provide one more tool in the toolkit of econometric estimation of oligopsony behavior, in particular for those cases where researchers may have rather limited data sets. We derive a set of equations to estimate buyer market power with fewer equations and less formal functional specifications than are typically used in such studies. We apply the model to the U.S. rice industry finding a degree of oligopsony behavior consistent with that found in studies of other agricultural markets.