Jel classification: D43, Q11, Q18
Recent price increases in red meat have been higher than the inflation rate, so they have raised the concerns on monopoly power abuse in the meat sector in Turkey. This study aims to examine the asymmetric price transmission process in the meat supply chain in the Turkish market. For this purpose, market power was investigated by the Asymmetric Error Correction Model (AECM) developed by von Cramon Taubadel in order to analyze the transmission between farm meat prices and retail meat prices. The long-run relationship between these two prices was examined using two step Engle-Granger and Gregory-Hansen co-integration test and monthly data set covering the period from January 2003 to February 2015. According to the results of co-integration test, the price series move together in the long run, which means they are co-integrated. We found evidence of a structural break in 2009. Results also indicate that, contrary to common belief, price transmission between producer and retail levels is symmetric. Although no evidence has been found supporting the monopoly power, it should be highlighted that there is further need to improve the competitiveness of producers against the big retailers/wholesalers in the sector.
red meat price, positive price asymmetry, negative price asymmetry, market power