Market power estimation methods in the agri-food sector: an assessment under Porter’s competitive forces

Abstract

The issue of competition in the agri-food value chain has attracted attention in literature since the use structure-conduct-performance framework. Despite the use of several methods, the new empirical industrial organization (NEIO) models have received much attention. This study examines the NEIO approaches under the lenses of Porter’s five competitive forces. This study shows that all the five competitive forces can be estimated and are also relevant in the determination of market power in the agri-food sector. However, our assessment suggests that none of the NEIO approaches including those with major extensions capture all the competitive forces, which determine competition in any industry according to Porter. There is the need to make a conscious effort in order to account for Porter’s forces of competition. This study, therefore, provides a sort of foundation to build on for future modeling methods that estimate market power in the agri-food value chain.