Entry deterring effects of contractual relations in the dairy processing sector

In 2010, the European (EU) High Level Expert Group on milk proposed the introduction of standard contracts between raw milk producers and processors to improve the bargaining position of producers and to stabilize the market by balancing dairy supply and demand. However, contracts may distort competition and deter market entry of rival dairies. We analyze competitive effects of contracts between dairy producers and processors by constructing a game theoretic model. We show that an incumbent dairy can deter a rival dairy’s market entry by offering an exclusive contract to a risk averse producer.


Editor(s):
Heckelei, Thomas
Issue Date:
Mar 25 2014
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/165088
Total Pages:
24
JEL Codes:
L13; L14; L41
Series Statement:
Agricultural and Resource Economics, Discussion Paper
2014:3




 Record created 2017-04-01, last modified 2017-08-27

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