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Economies of scale and endogenous market structures in international grain trade

Author

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  • Margherita Scoppola

    (Università di Macerata)

Abstract

The paper develops a two-stage duopoly model in which market structure is endogenous, as it is the outcome of the first stage of the game. The model considers a private firm and a State Trading Enterprise (STE) competing on a foreign market; the most important difference between the private firm and the STE is that while the STE makes use of external agents to export, the private firm may choose to vertically integrate downstream when transaction costs are large enough with respect to fixed costs. The game is solved for different modes of competition and under different assumptions regarding both homogenous and differentiated products. The results show that external shocks on export markets affecting the relative values of transaction and fixed costs may result in a change in market structures. The degree of product differentiation and the assumed mode of competition significantly affect the relative values of transaction and fixed costs at which the market sructure changes.

Suggested Citation

  • Margherita Scoppola, 2007. "Economies of scale and endogenous market structures in international grain trade," Working Papers 04-2007, Macerata University, Department of Studies on Economic Development (DiSSE), revised Feb 2009.
    • Handle: RePEc:mcr:wpaper:wpaper00004
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    References listed on IDEAS

    as
    1. Colin A. Carter & William W. Wilson, 1997. "Emerging differences in state grain trading: Australia and Canada," Agricultural Economics, International Association of Agricultural Economists, vol. 16(2), pages 87-98, May.
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    5. Chris M. Alaouze & A. S. Watson & N. H. Sturgess, 1978. "Oligopoly Pricing in the World Wheat Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(2), pages 173-185.
    6. Lavoie, Nathalie, 2003. "The Impact Of Reforming Wheat Importing State-Trading Enterprises On The Quality Of Wheat Imported," 2003 Annual meeting, July 27-30, Montreal, Canada 21901, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Lavoie, Nathalie, 2002. "Price Discrimination in the Context of Vertical Differentiation: An Application to Canadian Wheat Exports," Research Reports 25210, University of Connecticut, Food Marketing Policy Center.
    8. Caves, Richard E., 1977. "Organization, Scale, and Performance of the Grain Trade," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 16(3), pages 1-18.
    9. Ackerman, Karen Z. & Dixit, Praveen M., 1999. "An Introduction To State Trading In Agriculture," Agricultural Economic Reports 33909, United States Department of Agriculture, Economic Research Service.
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    11. Fengxia Dong & Thomas L. Marsh & Kyle W. Stiegert, 2006. "State Trading Enterprises in a Differentiated Product Environment: The Case of Global Malting Barley Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 90-103.
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    More about this item

    Keywords

    Multinational firm; international grain trade; State Trading Enterprises;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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