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Abstract

Spatially dispersed production and processing, endemic for most agricultural or renewable resource markets, causes oligopsonistic competition. The possibility and use of spatial price discrimination in these markets is well documented. It is also well known that the location of processors relative to competitors crucially affects the intensity of competition. However, insights regarding the relation between spatial price discrimination and the spatial differentiation of firms are barely present because the simultaneous investigation of these issues is often intractable analytically. We use computational economics to study these problems under a general theoretical framework. For instance, we show whether and under which conditions firms choose to differentiate their locations and/or price strategies. Results are consistent with observations in agricultural markets.

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