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Journal of Agricultural and Resource Economics >
Volume 24, Number 01, July 1999 >
Please use this identifier to cite or link to this item:
http://purl.umn.edu/30868
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| Title: | A STRATEGIC RATIONALE FOR CAPTIVE SUPPLIES |
| Authors: | Love, H. Alan
Burton, Diana M. |
| Issue Date: | 1999-07 |
| Abstract: | Partial backward integration is prevalent in many agricultural and natural resource processing industries. A strategic rationale for partial backward integration is developed for a dominant firm with a competitive fringe purchasing from competitive input suppliers. A partially backward integrated dominant firm potentially can increase profit through production efficiency gains and through a lower price for externally purchasing input. The optimal degree of backward integration results when the dominant firm's profit from exerting monopsony market power in the external spot market equals its profit from producing raw input internally, less the incremental cost of acquiring internal raw input production capacity. Comparative statics results are consistent with recent empirical studies of the beef packing industry. |
| URI: | http://purl.umn.edu/30868 |
| Institution/Association: | Journal of Agricultural and Resource Economics>Volume 24, Number 01, July 1999 |
| Total Pages: | 18 |
| Language: | English |
| From Page: | 1 |
| To Page: | 18 |
| Collections: | Volume 24, Number 01, July 1999
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| 24010001.pdf | 1177Kb | PDF | View/Open |
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