On Market Power and Chickens

Digitopoly, via Mark Thoma:

And today, there was this post on the Authors Guild blog that compared the plight of publishers/authors to that of chicken growers. Here is the analogy drawn:

To a chicken grower, for example, the relevant market isn’t restaurants or household consumers of chicken, it’s the market of chicken processors. Through a variety of machinations, including long-term contracts and the physical placement of processing plants (think baseball, before free agency), chicken growers now routinely have a market of only one processor to sell to.

Substitute ‘chicken grower’ for author and ‘chicken processor’ for Amazon and you have the basic story.

Now, it may surprise some readers to know that I happen to know quite a bit about market power and the chicken processing industry. Back in 2005, I was an expert witness employed by the Victorian Chicken Meat Processors. Now you may think that was putting me on the side of market power but not quite. It was actually to defend against a process that would allow chicken growers to collectively boycott processors if they were unhappy with negotiations. Now as it turned out the growers could actually negotiate collectively over prices (something not usually afforded sellers in industries) but they wanted more teeth. They wanted to be able to go on strike. Now everyone agreed that that would be a very damaging thing but the threat would bring some more negotiating clout; precisely the negotiating clout that a monopoly chicken grower would have. As it turned out, the Australian Competition Tribunal decided that that would be going too far as the chicken processors competed with one another and so even if there was only one in a region, it is not like there was deterred chicken grower investment harming Victorian consumers. To be sure, there was not a lot to like about being a chicken grower but despite having to make big investments to be one they were still choosing to do it. After all, if a processor pushed out the growers in their area, they wouldn’t have any chickens to process. It’s literally a chicken and egg problem.

I don't know that I've heard of producers being able to bargain collectively for prices.  It is hard to picture too many farmers here going together to do this.  They all figure they can beat the market, then outbid the other guys for cash rents.  Not much in the way of cooperating there.