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Pricing behaviour of cooperatives and investor-owned dairies in a spatial market setting

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  • Zavelberg, Yvonne
  • Storm, Hugo

Abstract

This study analyses spatial competition in Germany’s raw milk market differentiating between cooperatives and investor-owned firms. We assess the impact of the own legal form and that of neighboring competitors on the pricing behavior. The focus of the empirical analysis is on the relations of space, measured as the average distance to competing neighbours, and raw milk prices. The results allow testing the shape of the relationship between price and space derived theoretically in the literature. For the south of Germany we find a negative relationship between space and raw milk price while for the north the relationship is positive. In both north and south the effect is stronger for cooperative compared to investor-owned firms. Further, we test for the competitive yardstick effect for which we find only small evidence in the south. The estimation is based on a data set covering all German dairies from 2001 to 2012 providing information on raw milk prices, processing quantities, legal and production form.

Suggested Citation

  • Zavelberg, Yvonne & Storm, Hugo, 2015. "Pricing behaviour of cooperatives and investor-owned dairies in a spatial market setting," 150th Seminar, October 22-23, 2015, Edinburgh, Scotland 212681, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaa150:212681
    DOI: 10.22004/ag.econ.212681
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    1. Marten Graubner & Ines Koller & Klaus Salhofer & Alfons Balmann, 2011. "Cooperative versus non-cooperative spatial competition for milk," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 38(1), pages 99-118, March.
    2. Mingxia Zhang & Richard J. Sexton, 2001. "FOB or Uniform Delivered Prices: Strategic Choice and Welfare Effects," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 197-221, June.
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    4. Fousekis, Panos, 2011. "Spatial Price Competition Between Cooperatives Under Hotelling – Smithies Conjectures," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 12(2).
    5. Condon, Andrew M. & Cotterill, Ronald W. & Rhodes, V. James & Shaffer, James D. & Staatz, John M., 1987. "Cooperative Theory: New Approaches," Service Reports (SR) 280614, United States Department of Agriculture, Rural Development.
    6. Richard J. Sexton, 1990. "Imperfect Competition in Agricultural Markets and the Role of Cooperatives: A Spatial Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 709-720.
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    1. MCarmen Martínez†Victoria & Mariluz Maté Sánchez†Val & Narciso Arcas†Lario, 2018. "Spatial determinants of productivity growth on agri†food Spanish firms: a comparison between cooperatives and investor†owned firms," Agricultural Economics, International Association of Agricultural Economists, vol. 49(2), pages 213-223, March.

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