EXPORT COMPOSITION AND MARKET POWER: THE CASE OF SALMON

During the last decades, the US salmon import market becomes more concentrated with Chile and Canada being the leading suppliers. In terms of product form Chile exports mainly fresh fillets and frozen fillets, while Canada focuses on fresh whole salmon. This is also due to the trade policy imposed on salmon imports by the US government. Between 1998 and 2003, Chilean fresh salmon was subject to the US antidumping duty measure. In the literature little attention has been given to market power of different salmon products from exporting countries.

In this paper we apply a structural model to test market power for various salmon products exported from Chile and these from Canada, respectively. The structural model is composed of an inverse demand system model and optimality equations. The demand model first reveals how prices respond to changes in quantities. The Lerner Index in the optimality equations is related to the level of competition. In additional, the fuller representation of the structural model reveals how prices respond to changes in cost structure.

The estimation well explains the exporters' product composition in the US market. For example, the market power of Chilean salmon is mainly driven by frozen fillet exports, partly by fresh fillet exports, but definitely not by the whole salmon exports. The high profit margin forces Chile exporters to focus on frozen fillets salmon in the US market, which leads to the dominant share of frozen fillets salmon out of all types of salmon from Chile.