Is the Fluid Milk Subsector Competitive in Turkey?


Abstract: The significant increase in the concentration ratio in Turkey’s fluid milk market has heightened concern about the exercise of market power. During 1980-98, the 4-firm concentration ratio and Herfindahl index increased by 11% and 33%, respectively. In this study, we estimated the degree of imperfection in the fluid milk market at retail level using the New Empirical Industrial Organization approach during the period 1980-98. For this purpose, the demand equation and first-order-profit maximization condition, which allow the degree of market power to be determined, were estimated. Using 2-stage-least-square estimation, market power was found to be 0.11. This parameter shows that the fluid milk market is not perfectly competitive, but the behavior of firms is much closer to price taking than to collusion.

Keywords: Turkey’s milk market, market power, competition, oligopoly

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