The Impact of Structural and Behavioral Shocks on Market Power in Iran's Food Industry

Document Type : Research Article-en

Authors

M. Dindar Rostami

A. Ranjbaraki

M.M. Motalebi

Academic Center for Education, Culture and Reasearch, Tehran, Iran

https://doi.org/10.22067/jead.2026.96326.1399

Abstract

This study investigates the effects of structural and behavioral shocks on market power across 17 four-digit ISIC subsectors of Iran's food industry from 2002 to 2022. We employ a Panel Structural Vector Autoregression (PSVAR) model within the Structure-Conduct-Performance (SCP) framework, enabling a dynamic analysis of the interactions between structural and behavioral shocks. The variables examined include the exchange rate, energy costs, market concentration, value added, advertising expenditures, and intermediate input costs. Variance decomposition results reveal that structural and cost-related factors—intermediate input costs, value added, energy, and the exchange rate—account for over 80% of the variation in market power (Lerner index). Intermediate input costs emerge as the most significant negative driver of market power. Market concentration exerts a positive effect, while value added has a reinforcing effect through innovation. In contrast, behavioral factors such as advertising play a purely marginal role, contributing less than 1%. Owing to institutional constraints and consumer price sensitivity, these factors fail to significantly influence firms' pricing power. These findings confirm that market power in Iran's food industry is primarily shaped by cost structure, industrial concentration, and macroeconomic policies rather than by firms' behavioral strategies. Accordingly, given the key role of structural and cost factors, policy recommendations include managing production costs, fostering innovation and value added, mitigating exchange rate risk, regulating market structure, rethinking advertising strategies, and strengthening market regulation policies.

Keywords

Iran

Food industries

Lerner index

Market power

Panel SVAR

SCP framework

Subjects

• Agricultural Economics

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Authors retain the copyright. This is an open access article distributed under Creative Commons Attribution 4.0 International License (CC BY 4.0).

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