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Abstract
This paper reports on an expanded and revised version of the spatial
equilibrium model of the Australian dairy industry developed by MacAulay
(1997). In the expanded version there is demand for five manufactured
products. The transformation from bulk milk to final product is modelled
by considering milk and dairy products in terms of their primary
components, milk fat and protein. For market milk, a variable element was
added to the margin to replicate the effects of market power in the processor
to retail chain. Some implications for the deregulation of the Australian
dairy industry are noted.