Spatial pricing and competition : a theoretical and empirical analysis of the German raw milk market

Space is an important dimension in agricultural markets because of the relatively high transport costs and the high spatial concentration of food production. However, only a few studies consider space as a factor. This doctoral thesis bridges the gap. First, the analytical results for all different combinations of spatial pricing (free on board, uniform delivered and optimal discriminatory pricing) and spatial competition (Löschian, Hotelling-Smithies and Greenhut-Ohta competition) are described. Second, empirical results for the German raw milk market are presented. We thereby demonstrate that dairies adopt cooperative competition (price-matching), thus maximising their profits and decreasing the producer price. Additionally, a positive relationship between the producer prices of neighbouring dairies can be demonstrated. Other factors, such as the number of competitors or the organisational form of a dairy, can also influence the producer price.