HIPPER INFLATION AND MARKET POWER IN AGRICULTURE. A CASE STUDY IN THE BANANA INDUSTRY IN ISRAEL.

In a competitive market, the marginal cost is equal to the production price. On the other hand, if firms have market power, then production price is higher than the marginal cost. The purpose of this study is to test the hypothesis that hipper inflation influences market power. I make the application to the banana industry where a cartel exists but each member firm is a price taker. The present article is unique in testing the hypothesis using direct data on capacity. The results of this study lead to the conclusion that, in the banana industry, there is no relationship between hipper inflation and market power.