Supply Analysis in an Oligopsony Model

Abstract Primary agricultural markets are often characterized by oligopsony. This paper investigates the effect of an agricultural product supply shift on the equilibrium prices and quantities of farm products purchased by food processors. and on profits of food processors. The principal comparative static result indicates that, under oligopsony, qualitative implications of a disturbance in the supply of raw input differ from that under perfect competition and monopsony. Effects of other disturbances are identical in sign to the perfectly competitive case, although magnitudes may differ. Implications for supply estimation and agricultural policy analysis are briefly discussed.