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An Application of Equilibrium Size of Plant Analysis to Fluid Milk Processing and Distribution

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  • D. W. Cobia
  • E. M. Babb

Abstract

This article reports the results of an empirical study in which a model for equilibrium size of marketing firm in a spatial market is used. This model has received extensive treatment in this JOURNAL, particularly from a theoretical standpoint. The model is applied to the processing and distribution of packaged fluid milk. Solution of the model results in determination of size of plant associated with minimum average processing and distribution costs. Results of the study indicated that where packaged milk is distributed in semitrailers, in most situations increases in distribution cost as plant size is expanded do not offset decreases in processing cost up to the 134,000 quart per day plant. While total average cost declines within this range of plant sizes, most of the economies of size are realized by the 50,000 quart per day level.

Suggested Citation

  • D. W. Cobia & E. M. Babb, 1964. "An Application of Equilibrium Size of Plant Analysis to Fluid Milk Processing and Distribution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 46(1), pages 109-116.
    • Handle: RePEc:oup:ajagec:v:46:y:1964:i:1:p:109-116.
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    File URL: http://hdl.handle.net/10.2307/1236475
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    Cited by:

    1. Martin, Larry & Hedley, H.A., 1975. "An Analysis of Structural Change in the Ontario Feed Milling Sector," Working Papers 245020, University of Guelph, Department of Food, Agricultural and Resource Economics.
    2. MacKay, D.R. & Toft, H.I., 1978. "An Application of Spatial Equilibrium Analysis to the Transport and Processing of Wholemilk in N.S.W," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 46(01), pages 1-18, April.
    3. McClain, Emily A. & McLemore, Dan L., 1987. "Optimal Organization Of A Statewide Livestock Auction Market System: The Case Of Tennessee," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(2), pages 1-11, December.

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