Market Structure, Oligopsony Power, and Productivity

The study looks at how a regulation in the Chinese tobacco industry, which consolidated ownership and increased the power of a few buyers, affected efficiency and income distribution. The research shows that when some materials are unique and can’t be easily replaced, it’s difficult to measure the impact of price changes on products and productivity. However, the study uses a model to address this challenge and finds that the regulation raised input prices by 37 percent on average. This increase in buyer power reduced efficiency and took income away from rural households.

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