Market and Welfare Effects of Restructuring US Beef Packing for Competition and Resilience

This paper examines the USDA strategy to restructure US beef packing to increase competition and resilience by supporting the entry of small processors. Unlike previous studies that impose or calibrate conduct or assume symmetry between entrants and incumbents, we develop and estimate an asymmetric structural dominant‐oligopsony/oligopoly competitive‐fringe model using 1987–2022 data and IV‐GMM, allowing dominant packer conduct to respond to fringe entry. Findings indicate that fringe packer entry increases, rather than decreases, dominant packers' market power—widening price spreads and raising profits at the expense of consumers and farmers—without meaningfully improving resilience. The counterintuitive link between dominant market power and fringe entry arises because, in addition to being cost‐disadvantaged, the fringe group bids up cattle prices by shifting demand, eroding its ability to influence the residual market and enabling the dominant group to exercise greater market power.