Market Power in the U.S. Pecan Processing Industry

Abstract

Rising industrial concentration is an economic welfare issue that attracts economic analysis directed at measuring market power in the United States. A decreasing number of large companies control a significant share of sales in various industries. As a consequence, consumers may experience higher market prices charged by large firms with market power and consumers, as well as society, may be worse off. The U.S. pecan processing operation is highly concentrated in a limited number of large shelling firms. An econometric model, formerly applied to the beef packing industry, is utilized to estimate oligopoly/oligopsony market power in the pecan processing industry. Although monopoly power is discovered in this research, the alternate bearing nature of pecan trees is not captured in the pecan supply equation of the modeling system thereby limiting the usefulness of the monopsony estimates. Also, the lack of appropriate firm-level data is revealed as a major problem for statistical estimation. These issues challenge future research to accommodate biological information and firm-level data for any market power study, in perennial crops, especially pecans.