Economic analysis of the US fluid milk industry

Abstract

In the literature, mixed results have been obtained from the studies that have examined the market power of dairy cooperatives and processors. As the main objective of the present work, we intend to find further empirical evidence to investigate whether the dairy cooperatives’ oligopoly power that is implicit in the dynamic pricing games exists and how it influences the beverage milk margins from 1983 to 2012. We studied three regional markets: California, New York and Wisconsin. In all regions, we found clear evidence of alternating high- and low-margin regimes during the study years which indicates slight departures from perfect competition in the US fluid milk market. But the levels of departure vary across different states.

Keywords:

• fluid milk
• dairy cooperatives
• marketing margins
• milk marketing order

JEL Classification:

• Q13
• Q18
• L13
• L20