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Business & Economics

MARKET POWER IN LITHUANIAN, LATVIAN AND ESTONIAN DAIRY SECTORS: THE CASE OF RAW MILK MARKET
Aldona Stalgiene, Andrej Jedik, Ants-Hannes Viira, Agnese Krievina

ABSTRACT. The main objective of the study was to identify the market power in the raw milk markets of the Baltic countries in 2004-2014, as well as to compare the dairy supply chain segments (dairy farmers and dairy industry) between Lithuania, Latvia and Estonia, which have quite similar natural conditions favourable for dairy sector - one of the most important and competitive sectors of agriculture and food industry in all three countries. The concern was generated by increasing market concentration in dairy industry, which could result in lower milk prices for farmers due to increasing market power. Estimation of market power was based on the New Empirical Industrial Organisation (NEIO) models. Empirical research results showed that there was an oligopsony market power in the Lithuanian, Latvian and Estonian raw milk market. Multicriteria complex comparison of dairy farm performance showed that Lithuanian farmers were in relatively better situation, but Estonian farmers showed the best growth rate. Similar comparison results were also found in dairy industry.

KEYWORDS:  dairy sector, milk, market power, oligopsony, Lithuania, Latvia, Estonia.

JEL classification:  C10, D21, D43, L13, L66.