Asymmetric price transmission and market concentration: An investigation into four South African agro-food industries

During 2002 and 2003 retail food prices in South Africa increased dramatically. These increases put the spotlight on the concentration and market power of food manufacturing firms and retailers in the food supply chain. The proprietary nature of information on processes within the supply chain makes it difficult to identify uncompetitive behaviour. This paper reports on the application of a series of econometric analyses to test for asymmetric price transmission in the South African agro-food sector. The paper specifically seeks to show how market concentration increases the degree of asymmetry by comparing different levels of asymmetry between commodity and retail prices in the South African Economy. The results show that in South Africa industries that are considered to be concentrated at some level show a high degree of asymmetric price transmission, which, however, decreases when the retail product is perishable.