OLIGOPSONY POTENTIAL IN AGRICULTURE - RESIDUAL SUPPLY ESTIMATION IN CALIFORNIA PROCESSING TOMATO MARKET

Farmers' selling opportunities are often limited because of few processor/handlers and costly-to-transport raw products. This paper develops an empirical model to analyze the potential for exercise of monopsony power in these food markets. The approach is based on estimation of residual supply functions facing a processor or group of processors. Residual supply is the raw product supply facing a processor or group of processors after rivals' demands for the product have been accounted for. The model is applied to the processing tomato industry in California. Estimation results suggest that the oligopsony potential in this market is limited.