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Abstract
This paper uses an agent-based real options approach to analyze whether stronger vertical
integration reduces investment reluctance in pork production. A competitive model in which
firms identify optimal investment strategies by using genetic algorithms is developed. Two
production systems are compared: a perfectly integrated system and a system in which firms
produce either the intermediate product (piglets) or the final product (pork). Simulations show that the spot market solution and the perfectly integrated system lead to a very similar production dynamics even with limited information on production capacities. The results suggest that, from a pure real options perspective, spot markets are not significantly inferior to perfectly integrated supply chains.