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Spatial Competition In A Mixed Market - The Case Of Milk Processors

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  • Tribl, Christoph
  • Morawetz, Ulrich
  • Salhofer, Klaus

Abstract

The spatial dimension of the raw milk market facilitates the exercise of oligopsonistic power of milk processors towards farmers. At the same time, the market is characterised by a high share of processing cooperatives (coops). Hence, coops compete with investor-owned firms (IOFs) in a mixed market. Assuming uniform delivered pricing, we theoretically analyse spatial competition in a mixed market. Our theoretical and empirical results for Bavarian milk processors confirm the so-called “competitive yardstick effect”, i.e. coops can mitigate the oligopsony power of IOFs. In our theoretical model, the strength of this effect depends on the behaviour of IOFs.

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  • Tribl, Christoph & Morawetz, Ulrich & Salhofer, Klaus, 2017. "Spatial Competition In A Mixed Market - The Case Of Milk Processors," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 260911, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae17:260911
    DOI: 10.22004/ag.econ.260911
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