Spatial Competition of Milk Processing Cooperatives in Northern Germany

In this paper we develop a theoretical model of competition among marketing cooperatives (co-ops) in a spatial market setting assuming uniform delivered pricing and Loschian conduct. The model is an extension to Alvarez et al.'s (2000) spatial competition model for investorowned firms (IOF). Theoretical results include i) that the prices for raw milk are, ceteris paribus, higher in a pure market of coops than in a pure IOF market; ii) that even coops may imperfectly transmit price changes upstream; and iii) that the price farmers receive for their raw product is a function of economic space (distance times transportation costs) between coops. We test our theoretical findings for milk processing co-ops in Northern Germany using data of monthly average farm-gate prices for raw milk between 1999 and 2003 and estimating a reduced form regression model. Empirical results confirm our theoretical findings to a great extent.


Subject(s):
Issue Date:
2006
Publication Type:
Conference Paper/ Presentation
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/25633
PURL Identifier:
http://purl.umn.edu/25633
Total Pages:
16
JEL Codes:
L13; Q13
Series Statement:
Contributed Paper




 Record created 2017-04-01, last modified 2019-08-26

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