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Spatial Competition And Pricing In The Agricultural Chemical Industry

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  • Hall, R. Lee
  • Dorfman, Jeffrey H.
  • Gunter, Lewell F.

Abstract

Three theories of spatial competition are tested on retail price data for the agricultural chemical industry. The empirical tests find only weak evidence of any spatial competition using primary data from sixty-five retailers and twelve different chemicals. Demand and supply-side variables have statistically significant, but economically trivial impacts on retail chemical prices. Competition in the local retail chemical markets appears to have virtually no effect on the retail chemical prices. These results point indirectly to a virtually complete control of retail prices by the chemical manufacturers, likely through the rebate program they offer retailers. The oligopoly structure of the chemical manufacturing industry makes such control possible. The results suggest that consolidation of retailers or distributors will not have anti-competitive effects since price competition is essentially absent from this market already.

Suggested Citation

  • Hall, R. Lee & Dorfman, Jeffrey H. & Gunter, Lewell F., 2004. "Spatial Competition And Pricing In The Agricultural Chemical Industry," 2004 Annual meeting, August 1-4, Denver, CO 20340, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea04:20340
    DOI: 10.22004/ag.econ.20340
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    References listed on IDEAS

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