Not necessarily.

If firms release information that can be used for collusion that is anti-competitive. For example, if a firm released information on its “capacity” it could “commit” to lower levels of output and tell other firms so – and then they could tacitly collude. Or they could use that announcement to commit to a higher level of output in order to become a “stackelberg leader” thereby making the industry more competitive – but lets just ignore that …

As a result, the information gap could actually be a signal of intense competition … 😉

That makes sense. And I’ve got no problem with them entering our market – all for competition.

The supermarket in NZ issue is interesting, it is extremely interesting. There is a common feeling that the duopoly MUST be anti-competitive, but I would really like to see some work on it.

However, as I learned as a 15 year old economics student – the supermarkets are epically protective of there commercial data.

The Aussie supermarkets are trying to build up some goodwill before Aldi enters the market, which from what I’ve heard is a few years away from becoming an issue here.

Curiously, I’ve also heard that a growing number of Aussie dairy farmers are sending their product to New Zealand because they fear the price war will destroy their margins. That’s right, New Zealand is now importing milk from Australia.

“econo-euphemistic way”

I like that term, I like it a lot.

I would note that the “relationship building” I mentioned is genuinely separate from the concept of bargaining power in input markets (which is the fair point you are raising). However, that doesn’t stop the term econo-euphemism being awesome.

It doesn’t work. The reality is that nearly all people do nearly all their shopping at supermarkets because they are full range retailers. Dairies pick up the scraps.

I heard (yes, hearsay, hah, worse than anecdote) that pressure was exerted on the local supermarkets to refuse to stock the “alternative” milk. And as the alternative supplier didn’t have a full range of dairy products, the supermarkets went along. I like the econo-euphemistic way Matt @ #10 describes this as “relationship building”.

“I remember looking at the case in university and I thought the decision was a little on the knife edge”

At the time it definitely felt knife-edge.

“The fact that they can prevent others from entering the retail market by preventing them from entering the input market means that they also have power in the retail market”

Yar, of course we have to ask how much of this is due to relationship building rather than straight competitive pressure.

“thus with cournot competition, yes some rents savings get passed on to consumers, but it is still monopoly (duopoly) pricing (just with lower input costs)”

I was covering this when I said “or some form of capacity restriction”, as Cournot competition is just Bertrand pricing with a first stage where capacity is chosen. When its framed in this way I just find the Cournot model slightly inappropriate for modeling supermarket competition – there is definitely a large amount of capital, and other inputs can be shifted relatively quickly.

Closing out competitors from the input market is very concerning, I agree. But we still need to make sure our mechanism that drives this into prices consumers face is clear.

“Even when we say that the supermarkets have market power over their suppliers, if we are going to bemoan the price that consumers are paying we still need to make an argument regarding why this duopoly can extract rents from consumers (as without market power at this level, the rents from the lack of competition for suppliers will get passed on to consumers).”

The fact that they can prevent others from entering the retail market by preventing them from entering the input market means that they also have power in the retail market. thus with cournot competition, yes some rents savings get passed on to consumers, but it is still monopoly (duopoly) pricing (just with lower input costs)

No idea. Would be surprised if it was an issue they hadn’t thought about analysing though.

I know that there are clauses that would not allow a number of suppliers to supply a competitor to whatever supermarket they are supplying goods to – but in that case surely its a case of a new competitor spending time building up their own supply network.

Obviously the Warehouse Extra stores couldn’t achieve that – or were unwilling to given the time and effort involved. This suggests to me that potentially there isn’t room for a third firm in the market … just saying