Competition and Efficiency: Some theoretical prescription and Empirical evidence for the European dairy industry

This paper analyses the mechanisms through which increasing market competition may help cooperatives to improve technical efficiency to guarantee positive profits. This hypothesis is first formalised in a partial equilibrium framework and then is tested on a sample of European investor owned and cooperative firms, belonging to the dairy industry, using frontier analysis. Technical efficiency indexes are computed by using the one-stage approach as suggested by Reifschneider and Stevenson (1991), where proxies for competition are introduced as determinants of efficiency variancey. The results support the hypothesis that increasing market competition can affect positively the cooperatives´ efficiency. Depositato come Quaderno del Dipartimento TESAF n. 96. Disponibile come Working Paper n. 3/2006 del Centro per la Formazione in Economia e Politica dello Sviluppo Rurale al sito: http://www.depa.unina.it/depa/WP_3_2006.pdf