A Closer Look at the Relationship between Concentration, Prices, and Market Power in Food Retail
New AAEA member research release in the AEPP
Recent news sources, books, and academic studies have documented the recent rise in concentration across many industries. A recent USDA-ERS report shows food retail market concentration has risen in the past 30 years (Zeballos, Dong, and Islamaj 2023). A new article takes a closer and more comprehensive look to see if rising food retail market concentration signals increasing lack of competition and higher food retail prices. Market concentration is just one measure that needs to be evaluated in the context of other information and economic theory to fully assess the competitiveness of the market and implications for market power and food retail prices.
In the new article “A Closer Look at the Relationship between Concentration, Prices, and Market Power in Food Retail” published by the Applied Economic Perspectives & Policy, Xiao Dong and Anne Byrne from the USDA, Economic Research Service and Joseph Balagtas from Purdue University, dig deeper into the potential causes of rising concentration in food retail and whether rising concentration it a sign of lack of competition and higher retail prices.
The authors say, “Regulators and policymakers closely track market concentration in the U.S However, most of the economic research recognizes that we can’t assume that concentration causes market power and higher retail prices.,. Our paper addresses whether market concentration leads to higher prices. While we do not rule out potential positive relationships between market concentration, market power, and prices in food retail, we caution against solely relying on rising market concentration alone to infer that market power and prices have risen in food retail or that competition has diminished.”
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ABOUT AAEA: Established in 1910, the Agricultural & Applied Economics Association (AAEA) is the leading professional association for agricultural and applied economists, with 2,500 members in more than 60 countries. Members of the AAEA work in academic or government institutions as well as in industry and not-for-profit organizations, and engage in a variety of research, teaching, and outreach activities in the areas of agriculture, the environment, food, health, and international development. The AAEA publishes three journals, the Journal of the Agricultural and Applied Economics Association (an open access journal), the American Journal of Agricultural Economics and Applied Economic Perspectives & Policy, as well as the online magazine Choices and the online open access publication series Applied Economics Teaching Resources. To learn more, visit www.aaea.org.
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