Milking Market Power: How Demand Curvature Shapes Vertical Pricing

(Job Market Paper)

This paper examines how cooperative coordination shapes vertical competition in U.S. dairy markets. Large cooperatives both sell raw milk to independent processors and compete with them downstream, creating incentives to raise rivals’ costs. Exploiting herd retirements under the Herd Retirement Program (HRP) as plausibly supply shocks, I estimate a structural model linking flexible demand curvature to supply conduct. The results show that cooperatives sustain the highest upstream margins and that HRP rounds raised input markups by 3–7%. Consequently, consumers faced higher retail prices due to 54% pass-through rate for processors. These findings show how cooperative coordination enabled a raising-rivals’-costs strategy that redistributed surplus upstream while raising prices on consumers.

JEL Codes: L13; L42; L66; Q13; C51

Competition & Price Dispersion: Lessons from the Northeast Alliance

This paper explores the effects of the Northeast Alliance (NEA) between American Airlines and JetBlue Airways on airfares and the relationship between competition and price dispersion. Contrary to the existing literature, we find that the NEA increased airfares by 6.7% in NEA markets but significantly reduced airfares by 3.9% at LaGuardia Airport. While JetBlue's entry into NEA markets did not lower overall airfares, its entry reduced prices for lower-end products in markets where JetBlue had previously established services. Our finding suggests that softened competition makes it easier for firms to price discriminate.

JEL codes: L13, L40, L41, L93, D22, D40, D42, D43, K21, R41

Works in Progress

Revisiting Capper--Volstead: Legal Immunities, Market Power, and the Structure of Modern Dairy Cooperatives

This paper reconsiders the Capper--Volstead Act and related statutory immunities in the context of the U.S. dairy industry, where the confluence of legal exemptions and market structure has enabled a small number of vertically integrated agricultural cooperatives to wield substantial market power. Using a law-and-economics framework, we analyze how limited antitrust immunity, originally designed to foster countervailing power for fragmented farmers, has evolved into a regime that may facilitate exclusionary conduct, vertical foreclosure, and market manipulation. We combine institutional and legal analysis with empirical insights from market structure, vertical integration, and pricing dynamics in the fluid milk sector.

JEL Codes: K21, L13, L66