Market power and rents in global supply chains



Market power and competition policy in food supply chains has emerged as an important economic issue in economics, and a highly sensitive item on the policy agenda. Consolidation is taking place in the food industry, both in high-income countries and in emerging economies, but the impact of concentration in global food chains on efficiency and rent distribution is more nuanced and complex than often claimed. We review the literature and extend it by developing a model which explicitly takes into account market imperfections and contract enforcement problems in supply chains. Increased competition benefits farms by improving contract conditions, but contract enforcement becomes more complicated.