Market Dynamics in Supply Chains: The Impact of Globalisation and Consolidation on Food Companies' Mark-Ups

This paper examines whether ownership and increased competitive pressure affect foodretailers’ market power, analysing whether all actors involved in the food supply chaindeviate from the pricing behaviour that exists under perfect competition. A methodproposed by Roeger (1995) is used to estimate price-cost margins, relaxing theassumptions of perfect competition and constant returns to scale. The obtained resultsshow that foreign investments and consolidation have a positive and significant impact onthe market power of food processors and retailers. Food processors, agriculturalproducers and wholesalers have lower price-cost margins than retailers, which suggeststhat these actors price closer to marginal costs being more concerned with maximisingsocial welfare or that the former have higher costs than retailers. The results are robust tovarious estimation techniques and specifications.