Entry deterring effects of contractual relations in the dairy processing sector

Yvonne Zavelberg, Christine Wieck and Thomas Heckelei

No 165088, Discussion Papers from University of Bonn, Institute for Food and Resource Economics

Abstract: 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.

Keywords: Agribusiness; Agricultural and Food Policy; Demand and Price Analysis; Industrial Organization; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 24
Date: 2014-03-25
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https://ageconsearch.umn.edu/record/165088/files/dispap14_03.pdf (application/pdf)

Related works:
Journal Article: Entry deterring effects of contractual relations in the dairy processing sector (2016)
Working Paper: Entry deterring effects of contractual relations in the dairy processing sector (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ubfred:165088

DOI: 10.22004/ag.econ.165088

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