Bargaining structures in French dairy sector and impact of policy reforms

The recent CAP reform to reduce gradually the intervention price of some industry products induces changes in both the raw milk price schemes and the bargaining structures in the French dairy sector. In this article, we develop a bargaining model to investigate the reason of current and potential changes. We find that the relative strongness of the downstream processors has great influence on the bargaining outcomes and the equilibrium bargaining structures. The policy reform changes the relative strongness of downstream processors and therefore, induces the change in the equilibrium price schemes and bargaining structures.