Spatial Pricing and the Location of Processors in Agricultural Markets

Spatially dispersed production and processing, endemic for most agricultural or renewableresource markets, causes oligopsonistic competition. The possibility and useof spatial price discrimination in these markets is well documented. It is also wellknown that the location of processors relative to competitors crucially affects the intensityof competition. However, insights regarding the relation between spatial pricediscrimination and the spatial differentiation of firms are barely present because thesimultaneous investigation of these issues is often intractable analytically. We use computationaleconomics to study these problems under a general theoretical framework.For instance, we show whether and under which conditions firms choose to differentiatetheir locations and/or price strategies. Results are consistent with observations inagricultural markets.