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Competition in Local Food Markets

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  • Connolly, Cristina
  • Klaiber, H. Allen

Abstract

While local food production plays an increasingly prominent role in U.S. agriculture, there is growing concern about oversaturation. Using a national dataset, we identify locational attributes that are conducive to the establishment of direct-marketing operations and assess competitive behavior. Our model links firm-entry decisions to market size using reduced-form profit functions, which are characterized by the cost of agricultural land and demand variables. We find significant heterogeneity in the required population to support direct-marketing entrants and show that markets become perfectly competitive upon entry of the third direct-marketing establishment, with heterogeneous market potential for new entrants.
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Suggested Citation

  • Connolly, Cristina & Klaiber, H. Allen, 2015. "Competition in Local Food Markets," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205704, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea15:205704
    DOI: 10.22004/ag.econ.205704
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    References listed on IDEAS

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    1. Cristina Connolly & H. Allen Klaiber, 2014. "Does Organic Command a Premium When the Food is Already Local?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(4), pages 1102-1116.
    2. Timothy F. Bresnahan & Peter C. Reiss, 1987. "Do Entry Conditions Vary across Markets?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3, Specia), pages 833-882.
    3. Farnsworth, Richard L. & Thompson, Sarahelen R. & Drury, Kathleen A. & Warner, Richard E., 1996. "Community Supported Agriculture: Filling A Niche Market," Journal of Food Distribution Research, Food Distribution Research Society, vol. 27(01), pages 1-9, February.
    4. Schmit, T.M. & Gómez, M.I., 2011. "Developing viable farmers markets in rural communities: An investigation of vendor performance using objective and subjective valuations," Food Policy, Elsevier, vol. 36(2), pages 119-127, April.
    5. Jack P. Cooley & Daniel A. Lass, 1998. "Consumer Benefits from Community Supported Agriculture Membership," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 20(1), pages 227-237.
    6. Matthew Griffin & Edward Frongillo, 2003. "Experiences and perspectives of farmers from Upstate New York farmers' markets," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 20(2), pages 189-203, June.
    7. Carpio, Carlos E. & Wohlgenant, Michael K. & Boonsaeng, Tullaya, 2008. "The Demand for Agritourism in the United States," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(2), pages 1-16.
    8. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-386, August.
    9. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
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    Cited by:

    1. Martinez, Steve W. & Park, Timothy, 2021. "Marketing Practices and Financial Performance of Local Food Producers: A Comparison of Beginning and Experienced Farmers," USDA Miscellaneous 313069, United States Department of Agriculture.
    2. Jeffrey K. O'Hara & Nony Dutton & Nick Stavely, 2022. "The influence of farmers markets' characteristics on vendor sales," Agribusiness, John Wiley & Sons, Ltd., vol. 38(2), pages 295-311, April.
    3. Stevens Azima & Patrick Mundler, 2022. "Does direct farm marketing fulfill its promises? analyzing job satisfaction among direct-market farmers in Canada," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 39(2), pages 791-807, June.

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    Agricultural and Food Policy;

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