IDEAS home Printed from https://ideas.repec.org/a/bpj/bjafio/v16y2018i1p14n1.html
   My bibliography  Save this article

Spatial Pricing in Uncontested Procurement Markets: Regulatory Implications

Author

Listed:
  • Sesmero Juan

    (Purdue University, 403 West State St., West Lafayette, IN, USA, 47907)

Abstract

This study derives a general characterization of the misalignment between socially and privately optimal spatial pricing in an uncontested procurement market. In doing so it clarifies the link between firm-gate price markdown (pricing the input below its marginal value product at the firm’s location) and spatial price discrimination (varying markdown by distance). We subsequently examine the implications of our results for regulatory prescriptions. Our analysis reveals that, in the absence of regulation, increased firm-gate price markdown is necessarily accompanied by intensified spatial price discrimination, and that discrimination is always conducted against nearby producers. We find that if regulation targets price markdown at the firm gate, then spatial price discrimination is also inhibited resulting in welfare gains. In contrast, directly targeting spatial price discrimination (as generally prescribed by enacted and proposed legislation) cannot attain a first best, and may in fact result in efficiency losses relative to the unregulated equilibrium.

Suggested Citation

  • 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.
  • Handle: RePEc:bpj:bjafio:v:16:y:2018:i:1:p:14:n:1
    DOI: 10.1515/jafio-2016-0013
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/jafio-2016-0013
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    File URL: https://libkey.io/10.1515/jafio-2016-0013?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jung, Jinho & Sesmero, Juan Pablo & Balagtas, Joseph V., 2017. "Market Power in Feedstock Procurement and Economic Effects of Corn Ethanol," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258544, Agricultural and Applied Economics Association.
    2. Jinho Jung & Juan Sesmero & Ralph Siebert, 2020. "Spatial Differentiation and Market Power in Input Procurement: Evidence from a Structural Model of the Corn Market," CESifo Working Paper Series 8088, CESifo.

    More about this item

    Keywords

    spatial monopsony; spatial price theory; regulation; welfare;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

    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:bpj:bjafio:v:16:y:2018:i:1:p:14:n:1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://www.degruyter.com .

    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.

    We have no bibliographic references for this item. You can help adding them by using 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: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.