IDEAS home Printed from https://ideas.repec.org/p/ags/ubfred/250230.html
   My bibliography  Save this paper

Pricing behaviour of cooperatives and investor-owned dairies under spatial competition

Author

Listed:
  • Zavelberg, Yvonne
  • Storm, Hugo

Abstract

This paper analyses differences in the pricing behaviour between cooperatives and investor-owned dairies for raw milk in a spatial market setting. We systemize the theoretical literature concerning the relations between price and space in oligopsonistic markets. This provides the foundation for empirically analysing the price-space relationship in the German raw milk market. Space represents the distance to competing dairies and transportation cost. We differentiate between cooperatives and investor-owned dairies in North and South Germany. Specifically, the impact of a dairy’s own legal form and that of neighbouring competitors on the pricing behaviour is assessed. For the South of Germany, a negative relationship between space and raw milk price is found while for the North the relationship is positive. In both North and South the effect is stronger for cooperatives compared to investor-owned firms. Overall, our findings do not necessarily suggest an increase in market power and a decrease in raw milk prices when the concentration process of the dairy sector is progressing. Further, this paper provides the first spatial analysis of the competitive yardstick effect, for which we find weak evidence in the South. For the north, the theory of the competitive yardstick effect cannot be supported empirically. The estimation is based on a panel-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, 2016. "Pricing behaviour of cooperatives and investor-owned dairies under spatial competition," Discussion Papers 250230, University of Bonn, Institute for Food and Resource Economics.
    • Handle: RePEc:ags:ubfred:250230
    DOI: 10.22004/ag.econ.250230
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/250230/files/dispap16_02.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.250230?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    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. Hanisch Markus & Müller Malte & Rommel Jens, 2013. "The Cooperative Yardstick Revisited: Panel Evidence from the European Dairy Sectors," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 11(1), pages 151-162, December.
    3. 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.
    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. Panos Fousekis, 2011. "Free-on-board and uniform delivery pricing strategies in a mixed duopsony," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 38(1), pages 119-139, March.
    7. AM Alvarez & EG Fidalgo & RJ Sexton & M Zhang, 2000. "Oligopsony power with uniform spatial pricing: theory and application to milk processing in Spain," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 27(3), pages 347-364, September.
    8. Huck, Petra & Salhofer, Klaus & Tribl, Christoph, 2006. "Spatial Competition of Milk Processing Cooperatives in Northern Germany," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25633, International Association of Agricultural Economists.
    9. Michael L. Cook, 1995. "The Future of U.S. Agricultural Cooperatives: A Neo-Institutional Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(5), pages 1153-1159.
    10. 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.
    11. Richard T. Rogers & Richard J. Sexton, 1994. "Assessing the Importance of Oligopsony Power in Agricultural Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(5), pages 1143-1150.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tribl, Christoph & Morawetz, Ulrich & Salhofer, Klaus, 2017. "Spatial Competition In A Mixed Market - The Case Of Milk Processors," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 260911, European Association of Agricultural Economists.
    2. 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.
    3. Hueth, Brent & Taylor, Christopher W., 2013. "Spatial Competition in Agricultural Markets: A Discrete-Choice Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150506, Agricultural and Applied Economics Association.
    4. Marten Graubner, 2018. "Lost in space? The effect of direct payments on land rental prices," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 45(2), pages 143-171.
    5. Panagiotou, Dimitrios, 2019. "Pricing behavior in a mixed spatial duopsony with an agricultural cooperative under asymmetric information," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 0(Issue 1).
    6. Panagiotou, Dimitrios & Stavrakoudis, Athanassios, 2018. "Free-on-board and uniform delivered pricing strategies in pure and mixed spatial duopolies: The strategic role of cooperatives," The Journal of Economic Asymmetries, Elsevier, vol. 18(C), pages 1-1.
    7. Malvido Perez Carletti Agustina & Hanisch Markus & Rommel Jens & Fulton Murray, 2018. "Farm Gate Prices for Non-Varietal Wine in Argentina: A Multilevel Comparison of the Prices Paid by Cooperatives and Investor-Oriented Firms," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 16(1), pages 1-14, January.
    8. Graubner, Marten & Balmann, Alfons, 2012. "Spatial Pricing on Land Rental Markets," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125349, Agricultural and Applied Economics Association.
    9. Panos Fousekis, 2016. "Member Coordination Costs and Spatial Entry Deterrence in a Mixed Duopsony with a Cooperative," Spatial Economic Analysis, Taylor & Francis Journals, vol. 11(3), pages 340-354, July.
    10. Kumse, Kaittisak & Suzuki, Nobuhiro & Sato, Takeshi & Demont, Matty, 2021. "The spillover effect of direct competition between marketing cooperatives and private intermediaries: Evidence from the Thai rice value chain," Food Policy, Elsevier, vol. 101(C).
    11. Bontems, Philippe & Fulton, Murray, 2009. "Organizational structure, redistribution and the endogeneity of cost: Cooperatives, investor-owned firms and the cost of procurement," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 322-343, October.
    12. Murray E. Fulton & Konstantinos Giannakas, 2020. "Corruption in agricultural processing firms: A comparison of cooperatives and investor‐owned firms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 68(4), pages 445-460, December.
    13. Graubner, Marten & Balmann, Alfons & Sexton, Richard J., 2011. "Spatial Pricing and the Location of Processors in Agricultural Markets," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114601, European Association of Agricultural Economists.
    14. Zavelberg, Yvonne & Heckelei, Thomas & Wieck, Christine, 2016. "Entry deterring effects of contractual relations in the dairy processing sector," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(1), pages 1-16, April.
    15. Marten Graubner & Richard J. Sexton, 2023. "More competitive than you think? Pricing and location of processing firms in agricultural markets," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(3), pages 784-808, May.
    16. Qiao Liang & Xinxin Wang, 2020. "Cooperatives as competitive yardstick in the hog industry?—Evidence from China," Agribusiness, John Wiley & Sons, Ltd., vol. 36(1), pages 127-145, January.
    17. Sesmero Juan, 2018. "Spatial Pricing in Uncontested Procurement Markets: Regulatory Implications," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 16(1), pages 1-14, January.
    18. Ahmet Candemir & Sabine Duvaleix & Laure Latruffe, 2021. "Agricultural Cooperatives And Farm Sustainability – A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1118-1144, September.
    19. Jasper Grashuis, 2019. "Spatial Competition in the Iowa Corn Market: Informing the Pricing Behavior of Corporate and Cooperative Grain Merchants," Sustainability, MDPI, vol. 11(4), pages 1-13, February.
    20. Stefano Ciliberti & Angelo Frascarelli & Gaetano Martino, 2020. "Drivers of participation in collective arrangements in the agri‐food supply chain. Evidence from Italy using a transaction costs economics perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(3), pages 387-409, September.

    More about this item

    Keywords

    Agricultural and Food Policy; Demand and Price Analysis;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:ubfred:250230. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/zefbnde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.