In this paper we examine the marginal impact of changing farm supply on the market structure of the downstream food processing sector. We develop a theoretical model that allows for cost differences among processors and endogenizes downstream entry and exit. Comparative statics results are consistent with several well-established trends in the food processing sector. In particular, the analysis demonstrates that increasing concentration in the food processing sector is consistent with decreasing market power. Indeed, we find that when the farm supply curve shifts outward, an increase in concentration can only occur when there is a decrease in market power.
The purpose of the American Journal of Agricultural Economics is to provide a forum for creative and scholarly work in agricultural economics. Submitted manuscripts focus on the economics of natural resources and the environment, agriculture, and rural and community development. Papers are problem-oriented and demonstrate originality and innovation in analysis, methods, or application. Analyses of problems pertinent to research, extension, and teaching are included, as well as interdisciplinary research with a significant economic component. Review articles that offer a comprehensive and insightful survey of a relevant subject, consistent with the scope of the journal, are also included. All articles published are held to the same set of scholarly standards.
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American Journal of Agricultural Economics
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