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A Simple Model of Dairy Product Supply

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  • Jung, Hanjoon Michael
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    Abstract

    Dairy products are characterized by two properties, namely, perishability and short-periodic production. These properties are so unique that conventional studies in agricultural economics or in industrial organization might not explain the dairy product supply well. Hence, to understand this dairy product supply, we model it based on these two properties. We find that these properties invite middlemen who can efficiently deliver the products, and give rise to economies of scale in transportation and accessibility advantage in the dairy product supply. The economies of scale in transportation arise because greater production reduces average delivery costs per unit. The accessibility advantage occurs because lowering delivery costs significantly reduces total transportation costs in the long term.

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    File URL: http://mpra.ub.uni-muenchen.de/29653/
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29653.

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    Date of creation: Feb 2011
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    Handle: RePEc:pra:mprapa:29653

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    Keywords: Accessibility Advantage; Dairy Products; Dairy Product Supply; Economies of Scale; Perishability; Short-periodic Production.;

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    1. T.J. Mules, 1972. "A Supply Function For Dairy Products," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 16(3), pages 195-203, December.
    2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
    3. Jacek Cukrowski & Manfred M. Fischer, 2000. "Theory of Comparative Advantage: Do Transportation Costs Matter?," Journal of Regional Science, Wiley Blackwell, vol. 40(2), pages 311-322.
    4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    5. John Haldi & David Whitcomb, 1967. "Economies of Scale in Industrial Plants," Journal of Political Economy, University of Chicago Press, vol. 75, pages 373.
    6. Mules, T.J., 1972. "A Supply Function For Dairy Products," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 16(03), December.
    7. Philip McCann, 2005. "Transport costs and new economic geography," Journal of Economic Geography, Oxford University Press, vol. 5(3), pages 305-318, June.
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