Market power and cost‐efficiency effects: Broiler packing industry in South Korea

Abstract

AbstractThe effects of rising concentration on markups in the meatpacking industry have sparked ongoing global debate. In this vein, our study aimed to decompose these effects into two opposing components: market power and cost‐efficiency effects. We applied our model to the broiler packing industry in South Korea. Our findings indicate that cost‐efficiency effects decreased sharply from 74.642 in 2017 to ‐145.860 in 2021, while market power effects remained stable during the study period. We found that the decrease in cost‐efficiency effects has begun to counteract the market power effects, which can largely be attributed to profix‐maximizing behavior of broiler packers in response to the bird flu outbreak. Moreover, we highlighted that non‐material price changes were a significant source of the reduction in cost‐efficiency effects, which underscores the necessity of policy efforts to manage factor market situations in order to mitigate the negative consequences of market concentration. [EconLit Citations: D43, L11, Q13].