Measuring Market Power in the UK Retail Salmon Industry

This paper presents an investigation into the market structure for three product types of salmon (smoked, fresh and whole salmon) in the UK retail market. Evidence of the potential for market power and pricing conduct is analysed using structural simultaneous system equations based on the Bresnahan (1982) model. The importance of the retail market is recognised given the dominance of supermarket chains which accounted for £1.6 billion sales of seafood and the share of about 87% of all seafood retail sales in 2004 as compared with only 16% in 1988. The results indicate that the system is well represented by the models and that the market is competitive for fresh fillets and whole salmon but retailers exert some market power for smoked salmon. The hypothesis that market power is the same for all three products in the study was rejected; further indicating that retailers may be exercising market power for smoked salmon.