Market power and bargaining power in the EU food supply chain: The role of producer organizations

Abstract

Imperfect competition in the food supply chain is a concern for several “weak agents” such as small farmers and consumers. Given the difficulties in applying standard anti-trust regulations in the agrifood system, a growing interest is emerging in a decentralized approach where private entities, such as Producer Organizations (PO), are given active role in the governance of the agricultural markets. We present a simple bargaining model assessing the POs’ capacity to rebalance bargaining power along the supply chain. The results show that POs can benefit farmers by strengthening their negotiation power, improving their bargaining position and worsening the buyer’s one. Imposing a minimum size for POs may improve their effectiveness in affecting the buyer’s bargaining position. Such requirement should be calibrated on the structure of the downstream (upstream) relevant market.