Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: This paper uses the Bresnahan-Lau framework to analyze whether policy reforms specifically affecting Swedish dairy cooperatives, i.e. the two-price system (an input quota, 1986-1991) and the general deregulation of dairy policy (1991-1994), had any market power effects on the Swedish butter market. It is hypothesized that the two-price system enhanced market power, while the deregulation, making exports of butter less profitable, led to a lower level of market power exercised by dairy cooperatives. To account for non-stationary variables, a dynamic error correction model is adopted. The results show that the null hypotheses of no market power effect, for either of the two reforms, cannot be rejected at any reasonable significance level.

Keywords: agricultural policy; cooperatives; market power

JEL-codes: L22; L51; L66; Q11; Q18

22 pages, November 2, 2007

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