Regional-Level Analysis of Oligopsony Power in the Ukrainian Dairy Industry.

Transition was characterized by massive structural changes in most economic sectors in Ukraine. This is especially true for the dairy sector. Several countervailing developments took place under transition that affected the dairy industry. Interregional trade became feasible, the importance of milk delivered by households increased significantly, and most dairies became investor-owned companies. The latter point and the fact that the Antimonopoly Committee of Ukraine detected several price cartels in the industry lead us to offer that after transition, dairies were able to exercise oligopsony power toward dairy producers at the regional level. This paper estimates market structure models for raw milk in Ukraine using a translog production function for the processing sector at the national and regional level. The results suggest the existence of oligopsony power in three of 25 administrative regions in Ukraine, coupled with a potential deviation of procurement prices for raw milk from the value marginal product of raw milk ranging from 24.6% to 49.4%. [ABSTRACT FROM AUTHOR]