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Spatial Competition of Milk Processing Cooperatives in Northern Germany

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  • Huck, Petra
  • Salhofer, Klaus
  • Tribl, Christoph

Abstract

In this paper we develop a theoretical model of competition among marketing cooperatives (co-ops) in a spatial market setting assuming uniform delivered pricing and Loschian conduct. The model is an extension to Alvarez et al.'s (2000) spatial competition model for investorowned firms (IOF). Theoretical results include i) that the prices for raw milk are, ceteris paribus, higher in a pure market of coops than in a pure IOF market; ii) that even coops may imperfectly transmit price changes upstream; and iii) that the price farmers receive for their raw product is a function of economic space (distance times transportation costs) between coops. We test our theoretical findings for milk processing co-ops in Northern Germany using data of monthly average farm-gate prices for raw milk between 1999 and 2003 and estimating a reduced form regression model. Empirical results confirm our theoretical findings to a great extent.

Suggested Citation

  • Huck, Petra & Salhofer, Klaus & Tribl, Christoph, 2006. "Spatial Competition of Milk Processing Cooperatives in Northern Germany," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25633, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae06:25633
    DOI: 10.22004/ag.econ.25633
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    References listed on IDEAS

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    1. Wagner, Peter & Huck, Petra & Salhofer, Klaus, 2004. "Spatial Competition In Milk Processing Industry," 2004 Annual meeting, August 1-4, Denver, CO 20112, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Sexton, Richard J. & Lavoie, Nathalie, 2001. "Food processing and distribution: An industrial organization approach," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 15, pages 863-932, Elsevier.
    3. Condon, Andrew M. & Cotterill, Ronald W. & Rhodes, V. James & Shaffer, James D. & Staatz, John M., 1987. "Cooperative Theory: New Approaches," Service Reports (SR) 280614, United States Department of Agriculture, Rural Development.
    4. AM Alvarez & EG Fidalgo & RJ Sexton & M Zhang, 2000. "Oligopsony power with uniform spatial pricing: theory and application to milk processing in Spain," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 27(3), pages 347-364, September.
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    Cited by:

    1. Hueth, Brent & Taylor, Christopher W., 2013. "Spatial Competition in Agricultural Markets: A Discrete-Choice Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150506, Agricultural and Applied Economics Association.
    2. Fousekis, Panos, 2011. "Spatial Price Competition Between Cooperatives Under Hotelling – Smithies Conjectures," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 12(2).
    3. Zavelberg, Yvonne & Heckelei, Thomas & Wieck, Christine, 2016. "Entry deterring effects of contractual relations in the dairy processing sector," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(1), pages 1-16, April.
    4. Zavelberg, Yvonne & Wieck, Christine & Heckelei, Thomas, 2014. "How can the differences in German raw milk prices be explained? An empirical investigation of market power asymmetries and other price determinants," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182952, European Association of Agricultural Economists.
    5. Zavelberg, Yvonne & Storm, Hugo, 2016. "Pricing behaviour of cooperatives and investor-owned dairies under spatial competition," Discussion Papers 250230, University of Bonn, Institute for Food and Resource Economics.
    6. MCarmen Martínez†Victoria & Mariluz Maté Sánchez†Val & Narciso Arcas†Lario, 2018. "Spatial determinants of productivity growth on agri†food Spanish firms: a comparison between cooperatives and investor†owned firms," Agricultural Economics, International Association of Agricultural Economists, vol. 49(2), pages 213-223, March.

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