Monopsony Power and Coordination in the Broiler Industry

Abstract

The production of broilers is a well-known example of integration of food processors with growers. Tournament contracts are the norm in the industry, where processors provide chicks, feed, and veterinary supplies to the growers. The industry has come under antitrust scrutiny on several cases where processors have allegedly colluded to exercise market power both in the input and in the output markets and unilaterally exercised monopsony power. This article discusses the possible role that the integration model of contracting with growers may have on the monopsony power and collusion in the input market. In the case of confirmed collusion at the input market, damage compensation may be due. We present formulae that may be used to calculate damages in a buyer cartel.