Oligopoly and price transmission in Turkey’s fluid milk market

Farmers and consumers suspect that processing firms abuse their power in the milk marketingchain. We employ threshold autoregressive and moment threshold autoregressive tests and contrary toexpectations find evidence of a downward trend in UHT milk real price without a corresponding decline infarm-gate prices. The downward trend coincides with increased competition in the dairy industry and withthe growing market share of the formal sector at the expense of the informal sector. Major dairy processingfirms expand their market share and still enjoy healthy profits thanks to increasing returns to scale inprocessing and distribution in a growing market.