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Abstract
The aim of this study was to test the hypothesis of market power in the wholesale
market for UHT milk. The structure of this market is an oligopoly characterized as
bilateral and uses the model proposed by Schroeter et al. (2000), which allows
testing the hypothesis of market power without assuming the restrictive hypothesis
of price-taking behavior on one side of the market. The system of nonlinear
simultaneous equations that determines quantity, wholesale and retail prices of
UHT milk was estimated by nonlinear generalized method of moments. Estimation
of conduct parameter was 0.638, rejecting the hypothesis of a perfectly competitive
market. Evidences suggest that retailers exert oligopsony power on the dairy
industry; however, the distortions caused by such market power could not be
quantified.