Assessing retail market competition for multi-aquaculture products

Abstract

Purpose – The purpose of this paper is to investigate market competition for three product types of salmon (smoke, fresh and whole salmon) to understand whether supermarkets are exercising market power over salmon consumers in the UK retail market. Design/methodology/approach – Competition and the corresponding pricing conduct among supermarkets are tested by applying dynamic structural simultaneous system equations and using similar data set used by Jaffry et al. (2003). Findings – The results indicate that the market is competitive for fresh fillets and whole salmon but retailers appeared to exert some level of market power for smoke salmon. The hypothesis that market power is the same for all three products in the study was rejected; further indicating that the market for fresh products are competitive while retailers may be exercising market power over consumers for smoke salmon. Research limitations/implications – Current data limitations did not allow the investigation to cover the past few years in the modelling process. However, the results are still relevant as there have been no major structural changes in aquaculture products retailing landscape in the recent past. Practical implications – Concerns over the supermarkets’ exercise of market power over consumers have prompted the competition authorities to continue investigating the situation in the UK supermarket sector since 1996. The most recent investigation by competition authorities was in 2006. In all cases, no evidence of market power was found despite increased market concentration. Results from this study generally uphold the claim of the competition authorities in the UK. Originality/value – This is the first study to use a model within a structural econometric framework of firms to test for competitiveness of salmon products in the UK market place.