Supply Networks and Market Power in U.S. Poultry Procurement
I construct the first model of a shipment-based U.S. poultry procurement network, linking processing plants to county procurement markets and firm ownership. A demand-and-supply model with joint pricing across each processor’s plants recovers a baseline price–cost margin of 33 percent of the selling price. Wholesale buyers are 1.67 times as price sensitive as retail buyers and 3.33 times as price sensitive as food-service buyers. A 20 percent raw-poultry cost increase lowers total surplus by 17.7 percent and reduces both buyer and processor surplus. A merger of the third- and fourth-largest processors raises prices by 6.9 percent and increases processor surplus while reducing buyer and total surplus; 59 percent of the buyer loss is deadweight loss.