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Abstract

In this paper, we evaluate the role of market power by retailers within the supply chain of Parmigiano Reggiano and Grana Padano, the two most famous Italian quality cheeses. Market power is analysed in the context of an imperfect competition model of the supply chain, in which retailers are allowed to exercise market power both downstream and upstream. We jointly estimate market power parameters together with supply and demand elasticities, by means of a structural system of demand, supply and price transmission equations, estimated using the Generalised Method of Moments. We find clear evidences of downstream market power by retailers (toward final consumers), and no evidences of upstream market power (toward processors/ripeners). These results may be justified by the structure of the supply chain and by the peculiar characteristics of the two cheeses.

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