Punishment strategies are necessary to sustain a collusive oligopsony in a repeated game context when demand is uncertain and only market variables are observable. This article proposes a test for tacit collusion among potato processors in Washington state using a dynamic regime-switching model estimated with a finite mixture method. The results support the existence of punishment and collusive regimes and show the welfare losses due to anti-competitive behavior on the part of processors to be significant. Processors' oligopsony power is enhanced by higher domestic production, imports, and existing stocks, but it is ameliorated by high capacity utilization rates and exports.
The purpose of the American Journal of Agricultural Economics is to provide a forum for creative and scholarly work in agricultural economics. Submitted manuscripts focus on the economics of natural resources and the environment, agriculture, and rural and community development. Papers are problem-oriented and demonstrate originality and innovation in analysis, methods, or application. Analyses of problems pertinent to research, extension, and teaching are included, as well as interdisciplinary research with a significant economic component. Review articles that offer a comprehensive and insightful survey of a relevant subject, consistent with the scope of the journal, are also included. All articles published are held to the same set of scholarly standards.
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American Journal of Agricultural Economics
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