Thesis (MAgricAdmin)--Stellenbosch University, 2011. / ENGLISH ABSTRACT: Concentrated market power and information asymmetry represent forms of market failure within the South African dairy supply chain. Following deregulation, instead of large numbers of buyers and sellers so that no buyer or seller holds significant amount of power to influence the market; and perfect information availability and accessibility, the supply chain is characterised by market concentration at processor and retailer level as well as information asymmetry. South Africa‘s number of dairy farmers has declined by up to 50% since 1997, and they face a small number of processors which have regional dominance. These processors sell to a concentrated retail sector which is the main distribution channel for milk and dairy products. As processors and supermarkets emerge as major drivers within the dairy supply chain; processors in South Africa utilise the information asymmetry to engage in anticompetitive behaviour while supermarkets exert their power through the conditions of sale in contracts with processors as well as the threat of in-house brands. Farmers have less bargaining power and receive lower farm gate prices than they would have in the absence of concentrated market power and information asymmetry. Consequently, these market failures are detrimental to allocative efficiency and the enhancement of equity objectives. By method of a literature based comparative analysis, this study investigates the nature and extent of concentrated market power and information asymmetry within the selected dairy countries namely; South Africa, Australia, Canada, New Zealand, UK, and USA. The dairy supply chains in these countries show a spectrum of government control, such as Canada‘s system of supply management, Australia‘s deregulated system, and the US system which is mostly characterised by government intervention. The study then analyses how the selected countries address market failure within the dairy supply chain. An analysis of agricultural and dairy policies and strategies within the selected countries shows that systems that are designed to consider broader social goals (equity) apart for economic efficiency are more successful in preventing problems of concentrated market power and information asymmetry. The ways that the selected countries address the problems of concentrated market power and information asymmetry are analysed for applicability to the South African dairy supply chain. Is it recommended that in order to position the South African dairy supply chain to address problems of concentrated market power and information asymmetry effectively, a departure from the strict adherence to the market, to move towards a reregulated system in which broader social and environmental goals are considered by multiple stakeholders in formulating policy and strategy within the supply chain is required. / AFRIKAANSE OPSOMMING: Markkonsentrasie en inligting asimmetrie as vorme van markmislukkings kom voor in die Suid-Afrikaanse suiwelbedryf. Sedert deregulering het die getalle kopers en verkopers steeds nie voldoende toegeneem sodat geen van hulle genoeg bedingingsmag het om die mark beduidend te beïnvloed nie. Verder is markinligting se beskikbaarheid en toeganklikheid steeds ontoereikend. Die suiwelaanbodketing word gekenmerk deur markkonsentrasie op verwerkings- en kleinhandelvlak. Inligting asimmetrie heers ook steeds. Die getal suiwelprodusente in Suid-Afrika het sedert 1997 met 50% gedaal. Die suiwelprodusente verkoop melk aan 'n klein getal melkverwerkers wat die mark op plaaslike vlak oorheers. Hierdie verwerkers verkoop weer aan 'n gekonsentreerde kleinhandelsektor wat as die belangrikste verspreiders van melk en verwerkte suiwelprodukte dien. Die verwerkers en kleinhandelaars is die pasaangeërs in die suiwelaanbodkanaal. Die verwerkers gebruik inligting asimmetrie in onmededingende optrede jeens primêre produsente en supermarkte oefen hul markkrag jeens verwerkers uit deur middel van verkoopsvoorwaardes en afdreiging met voorkeur vir eie handelsmerke. Primêre produsente se bedingingsmag krimp en hulle ontvang laer plaashekpryse as wat hulle sou ontvang in die afwesigheid van markkonsentrasie elders in die aanbodkanaal en in die afwesigheid van inligting asimmetrie. Hierdie markmislukkings benadeel die mark se allokasiedoeltreffendheid en die bevordering van billikheidsoorwegings. Hierdie ondersoek behels 'n vergelykende ontleding van die aard en omvang van markkonsentrasie en inligting asimmetrie in geselekteerde suiwellande gegrond op 'n literatuurstudie. Die suiwellande is Suid Afrika, Australië, Kanada, Nieu Zeeland, Verenigde Koninkryk en die Verenigde State van Amerika. Die suiwelaanbodkettings in hierdie lande bevind hulself op 'n wye spektrum van regeringsbeheer, byvoorbeeld Kanada se aanbodbestuurstelsel, Australië se gedereguleerde stelsel en die VSA se stelsel wat die groter mate van statutêre regulering verteenwoordig. Die ondersoek fokus op die wyse waarop die geselekteerde lande markmislukkings in hul onderskeie suiwelaanbodkettings aanspreek. Die ondersoek toon dat daardie suiwelaanbodkettings wat ingerig is om breër sosiale doelwitte soos billikheid te verreken, en dus wyer te fokus as bloot ekonomiese doeltreffendheid, meer suksesvol is om magskonsentrasie en inligting asimmetrie te voorkom. Die wyse waarop die geselekteerde lande magskonsentrasie en inligting asimmetrie hanteer word geevalueer in terme van die toepaslikheid daarvan vir die Suid-Afrikaanse suiwelaanbodketting. Teen hierdie agtergrond word aanbeveel dat afgewyk word van 'n streng navolging van die vrye mark beginsel om die probleem van markkonsentrasie en inligting asimmetrie effektief aan te spreek. 'n Meer gereguleerde stelsel waarin verskeie belangegroepe se breër sosiale en omgewingsbewaring doelwitte in ag geneem word by strategie- en beleidformulering in die suiwelaanbodketting, word voorgestel.

Na década de 1990 o Brasil passou por um intenso processo de fusões e aquisições (F&A) que alteraram a configuração do parque industrial. A indústria de alimentos e bebidas teve destaque nesse processo. A proposta deste trabalho é avaliar se as F&A afetaram os preços ao consumidor na indústria de alimentos e bebidas do Brasil. Isso é feito no capítulo 3, utilizando-se dados do IPC-FIPE (Índice de Preços ao Consumidor da Fundação Instituto de Pesquisas Econômicas), da PIA-IBGE (Pesquisa Industrial Anual do Instituto Brasileiro de Geografia e Estatística) e do IPA-FGV (Índice de Preços no Atacado da Fundação Getúlio Vargas). Essa análise empírica é precedida por um estudo sobre a estrutura produtiva da indústria (Oferta: Capítulo 1) e um breve relato sobre as alterações recentes no mercado consumidor brasileiro (Demanda: Capítulo 2). Com isso, o trabalho oferece uma visão ampla sobre a indústria de alimentos e bebidas no Brasil, sinalizando mudanças após as fusões e aquisições, tanto na estrutura de oferta e demanda quanto no comportamento dos preços ao consumidor. / In the nineties, Brazil has gone through an intense process of mergers and acquisitions (M&A), with significant impacts on the country´s industrial plant. The Food and Beverage industry has had eminence in this process. This work intends to evaluate whether the M&A´s have had an effect on consumer prices of the food and beverage industry. This is the content of chapter 3, making use of IPC-FIPE (Consumer Price Index of the Institute for Economic Research Foundation) and of the IPA-FGV (Producer Price Index of the Getúlio Vargas Foundation). The empirical analysis is preceded by a study of the productive structure of the industry (supply ? chapter 1) and a brief description of the recent change in the Brazilian consumer market (demand ? chapter 2). In this way, the study offers a broad view of the food and beverage industry in Brazil, indicating changes after the M&A´s in the supply and demand structure as much as in the behavior of consumer prices.

Les Gaz à Effet de Serre (GES) jouent un rôle crucial dans la régulation du climat. Le changement climatique, conséquence de l'accumulation de GES dans l'atmosphère, a de nombreux impacts tels que les phénomènes météorologiques extrêmes (tempêtes, ouragans, cyclones, inondations, canicules, sécheresses), la disparition d'espèces animales et végétales, la prévalence croissante des maladies liées à la pollution atmosphérique (santé respiratoire par exemple). La pollution industrielle contribue au changement climatique. Par ailleurs, les firmes produisant un même bien sont en perpétuelle concurrence et leurs niveaux d'émission diffèrent selon leur technologie et leur pouvoir de marché. Compte tenu de ces effets néfastes croissants des agents économiques sur l'environnement, il est nécessaire que des politiques publiques soient mises en place pour réduire les émissions de GES.L'objectif de la thèse est triple. D'une part, elle vise à analyser la pollution dans des structures de marchés où tous les agents se comportent de manière stratégique (concurrence oligopolistique). D'autre part, elle vise à effectuer des exercices de statique comparative afin de mesurer les effets des variations de paramètres sur les équilibres stratégiques. Enfin, elle étudie différentes politiques publiques pour réguler les émissions liées à cette pollution. Notons ici que la thèse porte plus sur l'atténuation que sur l'adaptation au changement climatique.Le domaine exploré se situe au croisement de l'économie de l'environnement, et des jeux stratégiques de marché. / Greenhouse gases (GHG) play a crucial role in climate regulation. Climate change, due to the accumulation of GHGs in the atmosphere, has many consequences such as extremes weather events (storms, hurricanes, cyclones, floods, heat waves, droughts), extinction of animal and plant species, the increasing prevalence in diseases related to air pollution (e.g.,health respiratory). Industrial pollution contributes to climate change. Moreover, firms which produce the same good are in constant competition and their emission levels differ according to their technology and market power. Facing these deteriorating effects of the behaviour of economic agents on the environment, it is necessary to implement public policies to alleviate GHG emissions.The objective of this thesis is threefold. On the one hand, it aims to analyze pollution in market structures where all agents behave strategically (oligopolistic competition). On the other hand, it aims to carry out comparative static exercises in order to capture the effects of parameter variations on strategic equilibria. Finally, it studies different public policies to regulate emissions related to this pollution. It should be noted here that the thesis focuses more on mitigation than adaptation to climate change.The explored domain is at the junction of environmental economics, and strategic market games.

O presente trabalho tem como meta auxiliar na resposta a um dos principais problemas estudados no campo das ciências econômicas: o quanto e como intervenções regulatórias afetam a dinâmica dos mercados. Para isso será feita uma análise dos dados contratuais de compra e venda de energia elétrica no ambiente livre de comercialização de energia brasileiro por meio de uma metodologia que utiliza métricas de análise de redes complexas para avaliação da competitividade. Os dados abordam a atividade dos agentes comercializadores de energia nesse mercado durante o período de 2006 a 2015. É estabelecido então um ranking mensal desses agentes e criada a rede por meio da verificação das trocas de posições nesses rankings. Os resultados da análise indicam em quais anos houve maior variação na competitividade no mercado e pela análise das redes resultantes verifica-se a formação de estruturas de mercado. Posteriormente os resultados são comparados com métricas tradicionais de avaliação de competitividade e concentração de mercado e, por fim, é feita uma avaliação qualitativa dos índices sob a luz das principais alterações regulatórias ocorridas no período / The main goal of this project is to assist in the answer to one of the main issues in the study of Economics: how regulatory interventions affect the dynamics of the markets, in this case specifically, electricity markets. This will be achieved through an analysis of the contractual data of electric energy in the free Brazilian energy market environment through a methodology that uses complex network analysis for the evaluation of competitiveness. The data covers the contracts of all energy traders of this market in the period from 2006 to 2015. A monthly ranking of these agents is established and a network is created through the verification of position changes in these rankings. The results of the analysis indicates in which years there was greater variation in competitiveness and the analysis of the resulting networks indicates market structures formation. The results are then compared with traditional metrics for competitiveness and market concentration. Finally, a qualitative assessment of the results is made considering the major regulatory changes that have occurred in the study period

O presente trabalho tem como meta auxiliar na resposta a um dos principais problemas estudados no campo das ciências econômicas: o quanto e como intervenções regulatórias afetam a dinâmica dos mercados. Para isso será feita uma análise dos dados contratuais de compra e venda de energia elétrica no ambiente livre de comercialização de energia brasileiro por meio de uma metodologia que utiliza métricas de análise de redes complexas para avaliação da competitividade. Os dados abordam a atividade dos agentes comercializadores de energia nesse mercado durante o período de 2006 a 2015. É estabelecido então um ranking mensal desses agentes e criada a rede por meio da verificação das trocas de posições nesses rankings. Os resultados da análise indicam em quais anos houve maior variação na competitividade no mercado e pela análise das redes resultantes verifica-se a formação de estruturas de mercado. Posteriormente os resultados são comparados com métricas tradicionais de avaliação de competitividade e concentração de mercado e, por fim, é feita uma avaliação qualitativa dos índices sob a luz das principais alterações regulatórias ocorridas no período / The main goal of this project is to assist in the answer to one of the main issues in the study of Economics: how regulatory interventions affect the dynamics of the markets, in this case specifically, electricity markets. This will be achieved through an analysis of the contractual data of electric energy in the free Brazilian energy market environment through a methodology that uses complex network analysis for the evaluation of competitiveness. The data covers the contracts of all energy traders of this market in the period from 2006 to 2015. A monthly ranking of these agents is established and a network is created through the verification of position changes in these rankings. The results of the analysis indicates in which years there was greater variation in competitiveness and the analysis of the resulting networks indicates market structures formation. The results are then compared with traditional metrics for competitiveness and market concentration. Finally, a qualitative assessment of the results is made considering the major regulatory changes that have occurred in the study period

[pt] Em mercados onde há competição perfeita não há margem para os agentes maximizarem seus lucros através de comportamento não competitivo. Entretanto, o que se observa em mercados de energia elétrica se aproxima mais de um oligopólio do que de um mercado com competição perfeita. Se a competição não é perfeita, os agentes de geração podem tentar estabelecer estratégias de oferta de preços de forma a maximizar seus lucros. Nesta tese investiga-se a possibilidade de estabeler estratégias ótimas de oferta de preços no mercado de curto prazo em sistemas com predominância hidrelétrica, com ênfase no sistema brasileiro. São avaliados o estabelecimento de estratégias ótimas e o nível de poder de mercado nos dois possíveis esquemas de formação de preço utilizados em sistemas com predominância hidrelétrica. O atualmente utilizado no Brasil, denominado tight pool, em que preços e despachos são determinados centralizadamente através de modelos computacionais de otimização, e onde apenas os geradores termelétricos podem fazer ofertas de preços, e em um possível esquema geral de oferta de preços, onde os geradores hidrelétricos também ofertam preços. O poder de mercado é estudado através de modelos de competição oligopolista baseados na teoria dos jogos, e através de medidas de concentração de mercado. No caso do estabelecimento de estratégias ótimas de oferta de preços, um ponto crucial é a modelagem do comportamento de oferta dos agentes competidores. Em função da inexistência de dados históricos, o comportamento de oferta dos competidores é modelado através de distribuições de probabilidade triangulares, equivalentes a funções de pertinência típicas de uma modelagem fuzzy. Mostra-se para o sistema brasileiro que no tight pool a possibilidade do uso de ofertas estratégicas de preços e conseqüentemente o poder de mercado dos geradores termelétricos são bastante reduzidos. Já para um esquema geral de ofertas, o poder de mercado dos geradores hidrelétricos pode ser significativo, sendo que comportamentos agressivos podem levar o sistema a condições de suprimento críticas, se mecanismos de mitigação de poder mercado não forem estabelecidos. / [en] In perfectly competitive markets, there are no loopholes that can be exploited by agents to maximize profit through non-competitive behavior. However, electricity markets look more like an oligopoly than perfectly competitive markets. If competition is not perfect, generation agents may try to establish optimum price bidding strategies to maximize profits. If an agent is able to increase profits through other means than reducing costs, it is said to have market power. This thesis investigates the possibility of establishing optimum price bidding strategies in the short- term market of systems with hydroelectric predominance, with emphasis in the Brazilian system. The possibility of establishing optimum price bidding strategies and thus market power are evaluated in the two possible price formation schemes used in hydrodominated systems. The one currently used in Brazil, known as tight pool, where price are determined centrally through optimization models, and where only the thermal generators bid prices. Market power is also evaluated in a general price bidding scheme, where hydro generators also bid prices. Market power is evaluated trough an oligopoly model from game theory and through market concentration measures. In establishing optimum price bidding strategies, one crucial issue is modeling competitors`s price bidding behavior. Due to the lack of historical data, the price bidding behavior of the competitors is modeled by triangular probability distributions, equivalent to some membership functions typically used in fuzzy modeling. It is shown for the Brazilian system that in a tight pool scheme the market power and thus the possibility of establishing optimum bidding strategies are very limited. On the other hand, in a general price bidding scheme the market power of hydro generators may be significant and aggressive behavior may lead the system to critical supply conditions, if no market power mitigation mechanism is implemented.

<p>This thesis consists of a summary and four papers. The first two papers address political economy and indus-trial organization aspects of agricultural policy, and the last two international aspects of environmental policy.</p><p>Paper [I] explains Common Agricultural Policy (CAP) subsidies to farmers by the influence of farmer interest-groups with an EU-wide membership. The analysis is based on panel-data for fifteen commodities over the period 1986-2003. Because the CAP is set as an overall EU policy, effective lobbying presents a collective ac-tion problem to the farmers in the EU as a whole. Indicators of lobbying, which are based on this perception, are found to explain part of the variation in agricultural support.</p><p>In Paper [II], the Bresnahan-Lau framework is used to analyze whether policy reforms, i.e. the two-price sys-tem (an input quota, 1986-1991) and a general deregulation of dairy policy (1991-1994) had any market power effects on the Swedish butter market. The results show that the null hypothesis of no market power cannot be rejected, for any of the specific policy reforms, at any reasonable significance level.</p><p>Paper [III] concerns the welfare consequences of environmental policy cooperation. It is assumed that coun-tries finance their public expenditures by using distortionary taxes, and that they differ with respect to compe-tition in the labor market. It is shown how the welfare effect of an increase in the expenditures on abatement depends on changes in the environmental damage, employment and work hours. The welfare effect is also related to the strategic interaction among the countries in the prereform equilibrium.</p><p>In Paper [IV] environmental policy in an economic federation, where each national government faces a mixed tax problem, is addressed. It is assumed that the federal government sets emission targets, which are imple-mented at the national level. It is also assumed that the economic federation is decentralized. The results high-light a strategic role of income and commodity taxation, i.e. each country uses its policy instruments, at least in part, to influence the emission target.</p>

This thesis consists of a summary and four papers. The first two papers address political economy and indus-trial organization aspects of agricultural policy, and the last two international aspects of environmental policy. Paper [I] explains Common Agricultural Policy (CAP) subsidies to farmers by the influence of farmer interest-groups with an EU-wide membership. The analysis is based on panel-data for fifteen commodities over the period 1986-2003. Because the CAP is set as an overall EU policy, effective lobbying presents a collective ac-tion problem to the farmers in the EU as a whole. Indicators of lobbying, which are based on this perception, are found to explain part of the variation in agricultural support. In Paper [II], the Bresnahan-Lau framework is used to analyze whether policy reforms, i.e. the two-price sys-tem (an input quota, 1986-1991) and a general deregulation of dairy policy (1991-1994) had any market power effects on the Swedish butter market. The results show that the null hypothesis of no market power cannot be rejected, for any of the specific policy reforms, at any reasonable significance level. Paper [III] concerns the welfare consequences of environmental policy cooperation. It is assumed that coun-tries finance their public expenditures by using distortionary taxes, and that they differ with respect to compe-tition in the labor market. It is shown how the welfare effect of an increase in the expenditures on abatement depends on changes in the environmental damage, employment and work hours. The welfare effect is also related to the strategic interaction among the countries in the prereform equilibrium. In Paper [IV] environmental policy in an economic federation, where each national government faces a mixed tax problem, is addressed. It is assumed that the federal government sets emission targets, which are imple-mented at the national level. It is also assumed that the economic federation is decentralized. The results high-light a strategic role of income and commodity taxation, i.e. each country uses its policy instruments, at least in part, to influence the emission target.

This thesis proposes equilibrium models to link the wholesale and retail electricity markets which allow for reconciliation of the differing time scales of responses of producers (e.g., hourly) and consumers (e.g., monthly) to changing prices. Electricity market equilibrium models with time of use (TOU) pricing scheme are formulated as large-scale variational inequality (VI) problems, a unified and concise approach for modeling the equilibrium. The demand response is dynamic in these models through a dependence on the lagged demand. Different market structures are examined within this context. With an illustrative example, the welfare gains/losses are analyzed after an implementation of TOU pricing scheme over the single pricing scheme. An approximation of the welfare change for this analysis is also presented. Moreover, break-up of a large supplier into smaller parts is investigated. For the illustrative examples presented in the dissertation, overall welfare gains for consumers and lower prices closer to the levels of perfect competition can be realized when the retail pricing scheme is changed from single pricing to TOU pricing. These models can be useful policy tools for regulatory bodies i) to forecast future retail prices (TOU or single prices), ii) to examine the market power exerted by suppliers and iii) to measure welfare gains/losses with different retail pricing schemes (e.g., single versus TOU pricing). With the inclusion of linearized DC network constraints into these models, the problem size grows considerably. Dantzig-Wolfe (DW) decomposition algorithm for VI problems is used to alleviate the computational burden and it also facilitates model management and maintenance. Modification of the DW decomposition algorithm and approximation of the DW master problem significantly improve the computational effort required to find the equilibrium. These algorithms are applied to a two-region energy model for Canada and a realistic Ontario electricity test system. In addition to empirical analysis, theoretical results for the convergence properties of the master problem approximation are presented for DW decomposition of VI problems.

In this thesis current questions regarding the functionality of liberalized electricity markets are studied addressing different topics of interest in two main directions: market power and competition policy on electricity wholesale markets, and network investments and incentive regulation. The former is studied based on the case of the German electricity market with respect to ex-post market power analysis and ex-ante remedy development. First an optimization model is designed to obtain the competitive benchmark which can be compared to the observed market outcomes between 2004 and 2006. In a second step the horizontal breaking up of dominant firms (divestiture) is simulated applying equilibrium techniques (the classical Cournot approach and the Supply Function Equilibrium approach). The later issue of transmission capacity investment is addressed by highlighting the complexity of network investments in electricity markets and by analyzing a regulatory mechanism with a two part tariff approach. The technical characteristics of power flows are combined with economic criteria and tested for different network settings.