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Entry deterring effects of contractual relations in the dairy processing sector

Author

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  • Zavelberg, Yvonne
  • Wieck, Christine
  • Heckelei, Thomas

Abstract

In 2010, the European (EU) High Level Expert Group on milk proposed the introduction of standard contracts between raw milk producers and processors to improve the bargaining position of producers and to stabilize the market by balancing dairy supply and demand. However, contracts may distort competition and deter market entry of rival dairies. We analyze competitive effects of contracts between dairy producers and processors by constructing a game theoretic model. We show that an incumbent dairy can deter a rival dairy’s market entry by offering an exclusive contract to a risk averse producer.

Suggested Citation

  • Zavelberg, Yvonne & Wieck, Christine & Heckelei, Thomas, 2014. "Entry deterring effects of contractual relations in the dairy processing sector," Discussion Papers 165088, University of Bonn, Institute for Food and Resource Economics.
  • Handle: RePEc:ags:ubfred:165088
    DOI: 10.22004/ag.econ.165088
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    Cited by:

    1. Petersen, Julian & Hess, Sebastian, 2018. "Die Zukunft der Milch-Lieferbeziehungen aus Sicht deutscher Landwirte," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 67(2), June.
    2. Petersen, Julian & Hess, Sebastian, 2018. "Der Wettbewerb Um Rohmilch In Deutschland: Hat Das Bundeskartellamt Recht?," 58th Annual Conference, Kiel, Germany, September 12-14, 2018 275894, German Association of Agricultural Economists (GEWISOLA).

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    More about this item

    Keywords

    Agribusiness; Agricultural and Food Policy; Demand and Price Analysis; Industrial Organization; Risk and Uncertainty;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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