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Geographic diversification strategy and the implications of global market integration in table grapes

  • Angela M. Krueger

    (Department of Agricultural Economics, Texas A&M University,, TAMU 2124, College Station, Texas 77843-2124)

  • Victoria Salin

    (Department of Agricultural Economics, Texas A&M University,, TAMU 2124, College Station, Texas 77843-2124)

  • Allan W. Gray

    (Department of Agricultural Economics, Purdue University, 1145 Krannert, West Lafayette, Indiana 47907-1145)

The geographic diversification mode for U.S. agribusinesses to establish an international presence is examined, using the example of table grapes. This study extends the analytical work on geographic diversification strategy in a firm-level application that considers how longer marketing seasons might affect early-season premium prices. The method draws on market integration tests from the industrial organization literature. The extent of market integration is examined using a probabilistic measure. Then, a simulation of profit incorporates the probability that markets are integrated. Tests on the market for table grapes indicate high probability that markets for domestic grapes and imports from Chile are not integrated (0.81 and 0.91). Long distances and the lack of overlap in production seasons play key roles in this finding. The simulation that makes operational the findings of limited integration suggests that geographic diversification is more profitable and of lower risk than production in California alone. [JEL Classification: Q130, Q170, F140] © 2002 Wiley Periodicals, Inc.

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File URL: http://hdl.handle.net/10.1002/agr.10004
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Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 18 (2001)
Issue (Month): 1 ()
Pages: 81-99

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Handle: RePEc:wly:agribz:v:18:y:2001:i:1:p:81-99
Contact details of provider: Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  2. Ronald MacDonald & Ian W. Marsh, 1997. "On Fundamentals And Exchange Rates: A Casselian Perspective," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 655-664, November.
  3. Brent Hueth & Ethan Ligon, 1999. "Producer Price Risk and Quality Measurement," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 512-524.
  4. McNew, Kevin & Fackler, Paul L., 1997. "Testing Market Equilibrium: Is Cointegration Informative?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(02), December.
  5. Barry H. Adams & Kim L. Jensen & George C. Davis, 1997. "Knowledge and use of export assistance services by agribusiness," Agribusiness, John Wiley & Sons, Ltd., vol. 13(3), pages 285-294.
  6. Kling, Catherine L. & Sexton, Richard & Carman, Hoy, 1991. "Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery," Staff General Research Papers 1609, Iowa State University, Department of Economics.
  7. Frank Asche & Helge Bremnes & Cathy R. Wessells, 1999. "Product Aggregation, Market Integration, and Relationships between Prices: An Application to World Salmon Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 568-581.
  8. Patterson, Paul M. & Abbott, Philip C. & Stiegert, Kyle W., 1996. "The Export Enhancement Program'S Influence On Firm-Level Competition In International Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(01), July.
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