Can oligopsony power be measured? The case of U.S. old newspapers market

This paper uses an index analogous to Lerner-index in the input market to derive a price–cost margin that measures input exploitation by few large buyers. This paper identifies oligopsony characteristics associated with the old newspaper (ONP) input market for recycled-content newsprint manufacture and then examines the impacts of market performances on ONP input prices. The wastepaper recycling market, in particular, ONP has not been successful in utilizing the ONP generated. The existence of high sunk costs for entry to the market, along with the small numbers of buyers in the old newspapers market, were the reasons to believe that the waste paper industry had oligopsony elements among paper recycling mills. The regional oligopsony/oligopoly indices were derived and the impact of these market powers on ONP input prices were examined for period 1972–1995. The findings of this study were: oligopsony elements were present to certain degrees among the recycled-content newsprint manufacturers; and the oligopsony market power enabled these mills to exert a larger price–cost margin on ONP input market.