Browsing by Author "Pietola, Matias"

The thesis has three objectives: clarifying the welfare effects of buyer power, analysis of the possible joint dominance of pulpwood buyers and examining the abuse of buyer power. The concept of buyer power encompasses monopsony power and countervailing buyer power. Buyer power can be countervailing and welfare improving when there exists market power on the seller side. However, the abuse of monopsony power leads to pricing below the competitive level, which reduces welfare and usually harms consumers. Buyer power can occur in oligopsony where the market conditions are suitable for collusion. The risk of collusion is remarkable in the Finnish pulpwood markets, as evidenced by the buyer cartel in years 1997-2004. Collusion can also be tacit. Developments in the EU case law show that tacit collusion can be regarded as an abuse of collective dominance. This requires that the Airtours criteria are satisfied. Based on previous buyer cartel and market structure the pulpwood purchasers have a considerable incentive to tacitly collude. Altering the relation between domestic purchases and import can be used as a punishment mechanism if deviation takes place. Competition and the market power of the forest owners are limited and entry barriers are high. Notably these factors indicate that the pulpwood buyers may hold a position of collective dominance. The abuse of collective buyer power requires coordination, which is being facilitated by the market transparency and wood interchange between the buyers. During the cartel the firms shared detailed information regarding the cost structures of the plants. This private information may still be relevant despite the intervention of the competition authority. Finally, the collusion is being econometrically tested using a linear regression model. The observed time period is from January 2002 to October 2012. According to the results the detection of the cartel has had no statistical significance to pulpwood price relation (domestic price divided by import price). This supports the view that collusion still prevails. In addition the import of pine pulpwood has had a negative impact on the price relation implying that imports are used strategically to lower domestic prices.