Joint evolution of spatial integration and product segmentation on agricultural markets: the case of cereals in Mali

Within the context of liberalisation experienced by the Malian economy sincethe beginning of the 1990s, spatial integration of cereal markets has beenconsidered as a major tool as to avoid localised shortages due to productionshortfalls. However, market dynamic reveals since then new patterns: thediversification of urban consumer demand towards "modern cereals", inparticular rice and maize, drives the segmentation of the cereal market. Asconsumer s are likely to substitute traditional cereals, like millet and sorghum,for other cereal types, new market segments emerge.We account for this evolution with a theoretical model à la Hotelling : the goodis considered according to two characteristics, the spatial localisation (localmarket) and the cereal type. We show that, as far as market integration impliesthe reduction of transaction, it affects the strategic decisions of sellers. In fact,incentives to invest in product differentiation (and exploit new marketsegments) rises relatively to the incentives to take advantage of spatial pricedifferentials, as they decrease.Last, we test this analytical proposition on price data collected by theagricultural market information system (SIM/PAM) from 1990 to 2004 on 6local markets in central and northern Mali. We apply a vector error - correctionmodel, and find evidence for the intensification of spatial co- integrationrelations during the period. Moreover, we relate this latter dynamics to theevolution towards the segmentation of cereal markets in Mali. Last, the leadermarkets of this progression are identified as being the central urban markets.