Buying power in UK retail chains : a residual supply approach

Abstract

The development of supermarket chains has led to substantial concentration in food supply chains, and has raised concerns not only that these companies can exploit oligopoly power, but also oligopsony power. In this paper, we specify a residual supply schedule to investigate the degree of oligopsony power in retailing. Based on the residual supply elasticity, one can also derive a Lerner-type index to measure the degree of market power. After examining the largest supermarket chains in the United Kingdom, we find no evidence of monopsony power for three key seafood products.