Economies of scale and endogenous market structures in international grain trade
The paper develops a two-stage duopoly model in which market structure is endogenous, as it is the outcome of the first stage of the game. The model considers a private firm and a State Trading Enterprise (STE) competing on a foreign market; the most important difference between the private firm and the STE is that while the STE makes use of external agents to export, the private firm may choose to vertically integrate downstream when transaction costs are large enough with respect to fixed costs. The game is solved for different modes of competition and under different assumptions regarding both homogenous and differentiated products. The results show that external shocks on export markets affecting the relative values of transaction and fixed costs may result in a change in market structures. The degree of product differentiation and the assumed mode of competition significantly affect the relative values of transaction and fixed costs at which the market sructure changes.
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|Date of creation:||Mar 2007|
|Date of revision:||Feb 2009|
|Publication status:||Published in Agricultural Economics 37 (2007) 277-291|
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Web page: http://www2.unimc.it/sviluppoeconomico
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- Colin A. Carter & R.M.A. Loyns & Derek Berwald, 1998. "Domestic Costs of Statutory Marketing Authorities: The Case of the Canadian Wheat Board," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(2), pages 313-324.
- Carter, Colin A. & Wilson, William W., 1997.
"Emerging differences in state grain trading: Australia and Canada,"
Blackwell, vol. 16(2), pages 87-98, May.
- Carter, Colin A. & Wilson, William W., 1997. "Emerging differences in state grain trading: Australia and Canada," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 16(2), May.
- Nathalie Lavoie, 2005. "Price Discrimination in the Context of Vertical Differentiation: An Application to Canadian Wheat Exports," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 835-854.
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