Sunday, November 11, 2007


I read somewhere that market power lies at the points of chains of sales where oligopoly or oligopsony exist. These price makers take the vast majority of consumer surplus in the maufacturing chain, leaving the competitors at other points in the chain with essentially no surplus, at subsistance levels.

For example, the oligopoly of cereal companies lies inbetween the commoditized market for grains and the highly competitive retail market. Thus, the cereal companies have much larger markups than their costs of inputs and operations would otherwise suggest.

Does anyone know the proper name for this, where I might have seen it, or have a reference to something descrbing it more explicitly?

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