Market Power Dynamics in the Dairy Industry Using Autocratic and Pinning Strategies within the Framework of Game Theory

Document Type : modeling

Author

Agricultural Economics Departenat, Sayyed Jamaleddin Asadabadi University, Asadabad, Hamedan, Iran

10.30473/jier.2026.77346.1530

Abstract

Iran’s dairy industry, characterized by an oligopolistic market structure, has long witnessed complex strategic interactions among major firms that classical and static models fail to fully capture. Accordingly, the main research problem of this study is to investigate the long-term behaviors of firms in response to competitors by employing modern theories in the context of repeated games. The objective of this study is to provide a practical analysis of “Zero-Determinant (ZD)” strategies within the Cournot game framework for six leading brands in the industry, in order to determine how these strategies influence market equilibrium and firm profitability. The research methodology is based on mathematical modeling and numerical calibration using retail market data from 2023, through which five key market scenarios for milk and cheese were tested. The findings revealed that under the autocratic strategy, the leading firm (Brand 2) managed to increase its milk market profit by 139%, from 414 units at equilibrium to 990 units. In the cheese market, the firm stabilized the equilibrium price 15% above the competitive level (from 160 to 184 units) by managing supply effectively. Furthermore, results from the pinning scenario demonstrated that the firm could fully “lock” its profit at 300 units, such that behavioral fluctuations of competitors had no impact on its long-term returns.
Overall, the study concludes that ZD strategies can disproportionately enhance a firm’s market power and make it largely independent of market responses.

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References

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History

  • Receive Date: 08 February 2026
  • Revise Date: 20 March 2026
  • Accept Date: 09 May 2026

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