European Dairy Industry Model IMPERFECT COMPETITION IN A SPATIAL MODEL OF THE EUROPEAN DAIRY INDUSTRY

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1 Eropean ary Indtry Model IMPERFECT COMPETITION IN A SPATIAL MOEL OF THE EUROPEAN AIR INUSTR ohra Boamra-Mehemahe INRA Jany INRA and GREMAQ Vnent Réqllart INRA and IEI Worng Paper 1 /25

2 IMPERFECT COMPETITION IN A SPATIAL MOEL OT THE EUROPEAN AIR INUSTR ohra Boamra-Mehemahe aoate reearher at Unverty of Toloe Frane INRA Jany. Ph tdent at Unverty of Toloe Frane GREMAQ INRA Vnent Réqllart enor reearher at Unverty of Toloe Frane INRA IEI. Th paper wa preented at the 89 th EAAE Semnar Modellng agrltral pole: tate of the art and new hallenge. 3th-5 th Febrary 25 Parma Italy Abtrat: Th paper analye mperfet ompetton n a patal model that appled to the Eropean dary ndtry. We how how mperfet ompetton an be ntroded wthn the dary ndtry model developed by Boamra et al. 22. We then mlate for enaro that dffer n the ampton on ompetton. We how that the tene of maret power gnfantly modfe the mplt pre of ml omponent may lead to an nreae n EU port and that domet pre are not adeqate ndator of ompettvene n the preene of maret power. trbton n rpl among agent hanged and large welfare loe may be generated. Keyword: patal model mperfet ompetton ml and dary prodt agrltral poly ml qota. Introdton Mot model ed to analyze the eonom mpat of agrltral pole onder that agrltral maret wor n a perfetly ompettve framewor. If th ampton eem reaonable a long a one deal wth agrltral raw prodt at a ontry level or at the EU level th ampton more qetonable when analyng nternatonal trade and/or food maret that proeed prodt maret. It partlarly the ae for the analy of dary pole whh dretly at on proeed prodt maret. Th t mportant to develop analy of agrltral poly that ntegrate ome apet of mperfet ompetton. The am of th ontrbton to fo on the ntrodton of mperfet ompetton n patal model appled to the dary etor. A hort revew of lteratre defne where we tand. Then we provde ome evdene of mperfet ompetton n the dary etor. In the thrd eton we develop a mplfed model for the dary ndtry n the EU that ntegrate mperfet ompetton. The forth eton preent and de the - 1 -

3 mlaton relt for dfferent ompettve framewor. And fnally we mmarze the man fndng n the onldng part. 1. A bref revew of the lteratre on mperfet ompetton n patal model Mot of patal eqlbrm model ame perfet ompetton. Th they do not tae nto aont the non ompettve effet that may are beae of the tene of olgopole on maret. The tene of olgopolt behavor on maret may nflene maret eqlbrm and qalfe the tng model relt. However there t few patal olgopolt maret model. A frt attempt ha been developed by Taayama and Jdge 1971 who ondered a patal monopoly maret model and analye how maret eqlbrm wa modfed ompared to the perfetly ompettve patal model. In ther ettng they amed that the ame frm operate n all the regon. When reale among regon not poble then the monopolt drmnate pre among regon. They howed that when there trade from regon to regon then the margnal revene of the frm n maret atly eqal to the margnal ot of the frm n regon pl the tranportaton ot from to. Note that n the perfet ompetton framewor the eqalty between the pre n maret and the margnal ot of the frm n regon pl the tranportaton ot from to. Obvoly n the monopoly ae pre are hgher and prodton are lower than n the perfet ompetton ae. Taayama and Jdge alo plored monopoly prng rle when reale among regon poble that amng that arbtrage poble. Th mpoe addtonal ontrant for the monopoly namely pre among regon annot dffer more than the tranportaton ot between the ondered regon. Hahmoto 1984 ha tended the model propoed by Taayama and Jdge and developed a patal Nah non ooperatve eqlbrm model. He ondered that there one frm per regon whh ompete à la Cornot wth the other frm. A omparon of the Nah eqlbrm model wth the perfet ompettve and the monopoly model how that the dfferental n nterregonal pre n the Nah eqlbrm are greater than n the perfet eqlbrm framewor and lower than n the monopoly ae. Hahmoto alo howed that maret eqlbrm demand pply pre are modfed and that the trade flow may dffer from one framewor to the other. In the non ompettve ettng trade between regon depend not only on tranportaton ot bt alo on addtonal margn that are proportonal to the level of mport. Nelon and MCarl 1984 propoed a modfed veron of the patal eqlbrm model to analye an olgopoly model. They ded how to ntegrate dfferent maret trtre Cornot Staelberg and onetral varaton. The methodology ont n modfyng the perfet eqlbrm framewor by addng a ondton of maxmaton of frm proft that tae nto aont the trateg nteraton between frm. However they amed that all frm one frm n eah regon have dental ot and - 2 -

4 that tranportaton ot are zero. Th onderably rede the empral attratvene of ther model. More reently ang Hwang and Sohng 22 have tended the ymmetr patal Cornot ompetton model developed n the lteratre to heterogeneo demand and ot fnton. In partlar they defned neeary ondton for the nqene of olton. They appled t to the US oal maret. However the mplementaton of mperfet ompettve framewor n appled model tll not well tded. In the food etor Kawagh Sz and Kaer 1997 have appled an mperfetly ompettve patal eqlbrm model to the dary ndtry n Japan ng the general methodology developed by Nelon and MCarl 1984 and Hamoto They too nto aont the pefte of the Japan ml maret organzaton. In partlar they dtnghed the fld ml maret from manfatrng ml maret. Maret power on the fld ml maret analyed whle qota and garanteed pre preval on the manfatrng ml maret. Moreover they ntegrated the pooled pre poly ed n th ontry. They fond that the Cornot-Nah eqlbrm olton were more mlar to atal obervaton ompared to the monopoly ae or to the perfetly ompettve framewor. It hold be treed that nder a perfet ompetton framewor trade between regon alway oneway trade. On the ontrary wth an mperfet ompetton framewor and homogeno prodt two-way trade or n nmero ae. Th framewor th one of the poble planaton of two-way trade freqently oberved. Note that another mportant planaton related to prodt dfferentaton. Nmero empral model are blt pon the emnal wor of Armngton A hown by Brander and Krgman 1983 from a theoretal pont of vew dfferent taton may or from no trade to blateral trade gven the maret trtre the prodton and trade ot and the pattern of demand n eah ontry a well a poly ntrment. 2. Some evdene of mperfet ompetton n the EU dary etor The onentraton of the dary ndtry n the Eropean Unon dvere. It depend on the ontry a well a on the prodt. We provde n Table 1 ome rato of onentraton for ome EU ontre. Th onentraton rato onderably vare among ontre a well a prodt. It eem that onentraton hgher n Frane and UK a ompared to Germany and Italy. We do not have tatt on the Netherland or enmar bt t very lely that onentraton rato are hgher n thee two ontre a prodton domnated by one or two large ooperatve

5 Table 1. - Level of onentraton of dary proeor year 22 Germany Italy Frane UK Lqd Ml CR CR Btter CR Powder CR CR All heee CR CR CR CR Hard heee CR Sore: ontrbton of EIM proet reearher It alo hold be treed that onentraton n the heee ndtry gnfantly hgher a oon a we onder eparately the man heee ategore. Th dretly qeton the defnton of the relevant maret. To lltrate th pont Table 2 provde nformaton on the onentraton rato n the Frenh heee ndtry. Table 2. - Conentraton rato n the Frenh heee ndtry 2 CR-4 HHI All heee 39.5% 57 Hard heee 6.2% 1233 Sem-Hard heee 39.1% 59 Soft heee 61.9% 1374 Ble heee 66.4% 1242 Freh heee 63.2% 1262 Proeed heee 89.9% 3748 Sore: Chaaban 24. To or nowledge very few wor analyzed the e of mperfet ompetton for the EU dary etor. The mperfet ompetton e ha reeved relatvely low attenton by Eropean agrltral eonomt whle th top ha reeved more attenton for the US maret. A MCorrton 22 nderlne mperfet ompetton hold not be negleted ne evdene gget that agrltral maret n Erope are olgopolt and n partlar there a gng maret power of retaler. Hene f mperfet ompetton mportant t ha mplaton alo n the way government agrltral pole are degned and evalated. Some wor evalate the degree of pre tranmon n the ndtry. Only few dretly tet for maret power. Mlan 1999 tde the trtre of 18 food ndtre n Span for the perod The etmated Learner nd how the tene of maret power for mot of the ndtre - 4 -

6 where the dary ndtry ran nnth wth a vale of.72 gnfantly dfferent from zero. Gohn and Gyomard 2 fo on the retal level. Aordng to ther relt more than 2 perent of the wholeale-to-retal pre margn for dary prodt an be attrbted to maret power dtorton. To get a more omplete vew the reader hold refer to Boamra-Mehemahe Réqllart and Soregarol A patal eqlbrm model of the Eropean dary ndtry 3.1 Perfet ompetton ampton We frt preent the patal eqlbrm model of the Eropean dary ndtry developed by Boamra et al. 22. It ntegrate the whole hannel of the EU dary ndtry from the pply of ml to the demand for fnal ommodte throgh an ntermedate tep of proeng ml nto fnal ommodte. It an hedon ml haratert patal eqlbrm model whh ntegrate an agrltral prodt ow ml 2 ml omponent fat and proten the dfferent member tate 14 and the ret of the world and 14 fnal dary prodt. The model ntegrate the EU dary poly ntrment that nlde ml prodton qota nterventon pre a floor pre for btter and SMP domet maret domet bde for ndtral e of btter and SMP a prodton bdy for aen port bde and mport tarff rate qota for eah fnal dary prodt a well a dret deopled payment Jne 23 Lxembrg agreement. Moreover GATT mport and port ommtment are pltly modelled. We now formally preent the model. The nvere pply fnton for ml n regon denoted S wth the qantty of ml olleted. We denote x the ontant margnal ot for olletng ml n eah regon. Beae ml a bl prodt we do not allow trade of raw ml between regon. We denote the prodton of the proeed ommodty n regon. Prodton of ommodty nvolve two ba omponent fat and proten that are an ntegral part of raw ml and that are rearranged and alloated among proeed ommodte. We denote α the qantty of the th omponent per nt of raw ml proded n regon and γ the qantty of the th omponent per nt of proeed ommodty. Note that ml ompoton vare aro regon whle ompoton of fnal ommodte doe not. Fnal ommodte are traded among regon and are amed to be homogeno. Under a Leontef tehnology the tranformaton of the raw ml nto proeed ommodte mt atfy: γ α 1 Eqaton 1 enre the balane n the alloaton of omponent n regon. Bede ml omponent the prodton of ommodty alo nvolve labor and aptal npt whh are provded at a ontant margnal ot. We ame that proeng ot are dental among regon

7 The nvere demand fnton for eah fnal ommodty n regon denoted where denote the onmpton of ommodty n regon. Smlarly the net mport demand fnton from the ret of the world denoted where denote the onmpton of ommodty n the ret of the world. Trade aro regon nvolve tranportaton ot. We ame a ontant margnal ot for tranportaton of ommodty from regon to regon and denote t by. Intra-trade flow denoted repreent the qantty of ommodty that tranported from regon to regon. Note that the qantty of ommodty that both proded and onmed n the ame regon. Smlarly tra-trade flow denoted by E repreent the qantty of ommodty that ported from regon to the ret of the world n the port regme. We dtngh bdzed port = b from non bdzed port = nb. The per-nt port bdy for ommodty denoted by ES. Note that ES t " nb ". The trade flow ontrant aro regon are: E 2 3 E 4 In any regon thee eqaton garantee that port pl domet e annot be larger than domet prodton eqaton 2 and that domet onmpton annot eed domet prodton pl mport eqaton 3 and eqaton 4. ontrant a: The model nlde ml qota n eah regon denoted by. We th wrte the ml qota. 5 We alo ntrode a ontrant on the volme of bdzed port denoted by E. We th have: " E " b E 6 A a ba for repreentng reore alloaton we onder the followng optmzaton problem: - 6 -

8 Max t E d t QW " " ES d E E = S d Sbet to 1-6 E. x 7 Conder the Lagrangean aoated wth eqaton 7: L = t λ λ d t '' '' E E ES d E q λ q w where λ λ λ λ λ λ aoated to ontrant 1 to 6. S d λ λ w λ γ E x '' b'' α E are the Lagrange mltpler The Khn-Ter ondton aoated wth the above maxmzaton problem are: = S = λ α x λ γ λ q λ = > = > 8 9 = = λ λ = > = > 1 11 E E = t '' b'' '' nb '' = t = t λ " " λ ES λ '' b'' λ λ λ w λ E E E E = > '' b'' '' b'' '' nb'' '' nb'' = > = > 12 13a 13b Interpretng q λ a the nt qota rent n regon eqaton 8 mple that when prodton potve the farm-gate pre of ml that eqal to the margnal ot pl the nt qota rent eqal to the vale of ml omponent mn the ml olletng ot. From eqaton 9 we nterpret λ a the - 7 -

9 proder pre for ommodty n regon. Smlarly from eqaton 1 and 11 and are maret pre of ommodty n regon and n the ret of the world repetvely. Eqaton 12 tate that f trade or from regon to regon then the dfferene between the onmer pre n regon and the proder pre n regon eqal to the tranportaton ot between the two regon. Eqaton 13b eqvalent to eqaton 12 n the ontt of nternatonal trade. Eqaton 13a how that port bdy at n the oppote dreton of tranportaton ot. In addton when the WTO ontrant on bdzed port bndng an addtonal ot appear that orrepond to the hadow vale aoated to the ontrant. λ λ 3.2 Imperfet ompetton ampton We now ame that only few frm are atve on ome fnal ommodty maret. Thee frm therefore ert ome maret power whh we want to tae nto aont. We ame a Cornot-Nah ompetton that frm hooe trategally ther level of prodton. A frm an at on dfferent maret n two way. Frt a frm an ell a gven prodt n the dfferent regon. Alternatvely a gven frm an ell dfferent prodt n a gven regon. A margnal ot are amed to be ontant n or ettng nether ale nor ope eonome and demand are ndependent the maxmaton program of a frm on a gven maret then eparable n all the hoe varable qantte old on the dfferent maret. Formally the maxmaton program of a frm n regon whh prode dfferent ommodte gven by: Max wth xd xe t p xd π xd xd t xe '' '' = ES xe xe the pre of omponent n regon I and xd xe xe = xe. p γ xd xe We th onder that frm do not ert olgopony power. Qantte proded by a frm are denoted n lower ae letter whle aggregate qantte are n pper ae letter. Amng that there are n dental frm prodng on maret n regon we get xd = n. Frt order ondton are gven by: π xd xd xe = xd xd p γ t = 14a - 8 -

10 '' '' = = ES t p xe xe xe xe xd γ π 14b A t an be een from above frm onder eah ontry a a eparate maret and t margnal revene n a maret aheved ndependently of the other maret. If frm behave a pre taer.e. f they are n a perfetly ompettve maret then = xd. The margnal revene of frm n maret for ommodty eqal to the maret pre. However f frm have ome maret power then < xd. Maret pre wll be hgher than margnal revene whh allow for ome marp to the olgopolt frm. In order to ntrode mperfet ompetton behavor among frm or regon the lteratre how that the obetve fnton ha to be adted n h a way that the frt order ondton of the model wll now reflet the ondton of frm proft maxmzaton nder trateg nteraton. Ung ondton 14a and 14b the model an be rewrtten a the followng maxmzng program adted for mperfetly ompettve maret when n frm are atng n regon : = x E E E ES t t d S d d n d n d E QW Max '' '' Sbet to 1-6. E The dfferene between the obetve fnton n model 7 and 15 the term : E d n d n 1 1. When the maret perfetly ompettve th term eqal to zero and the maxmzaton program ontent wth model 7. If frm behave le Cornot-Nah ompettor then ng 14a and 14b and the eqalty between margnal ot and margnal revene th term repreent the total - 9 -

11 marp n the dfferent maret. A hown by Kawagh Sz and Kaer 1997 other trateg nteraton an be ntegrated n the model n partlar one an e the onetral varaton n order to model other tratege. Solvng for the Khn and Ter ondton lead to the frt order ondton 8 11 fond n the perfet ompetton framewor. However ondton 12 13a and 13b are modfed to tae nto aont the marp n the dfferent maret: E E '' b'' = t '' nb'' = t λ " " = t ES λ '' b'' λ 1 n λ λ λ 1 n w 1 λ n E E E " nb" E " nb" " b" " b" = > E E E E '' b'' '' b'' '' nb'' '' nb'' = > = > 16 17a 17b Eqaton 16 17a and 17b dffer from 12 13a and 13b by the lat term n the rght hand de of the eqaton that reflet the margn on the ondered trade atvty. Note that the lower the nmber of frm atng n the domet ontry the larger the aoated marp. 3.3 Applaton to the dary etor We develop a mplfed veron of the dary patal eqlbrm model preented above nvolvng only two Eropean Unon regon a northern Eropean regon NORTH that nlde Atra enmar Fnland Germany Ireland the Netherland Sweden and Unted Kngdom and a othern Eropean regon SOUTH that ompoed of Belgm Lxemborg Frane Greee Italy Portgal and Span. In addton to thee two aggregate of the EU ontre we onder a net demand for mport from the ret of the world. The mplfed model nlde two ommodty aggregate. Frt we onder the aggregaton of ndtral prodt IN. Th aggregate ompoed of btter m ml powder whole ml powder ondened ml and aen. The eond ommodty the aggregaton of fnal onmpton ommodte FCT whh nlde heee lqd ml ream and freh prodt. The empral model ha been developed from oberved data n year 2 at the member tate level and at the ommodty level. To ompte the aggregaton over ommodte we have allated weghted m for prodton onmpton and port qantte ng the weghtng oeffent β - 1 -

12 that repreent the hare of the vale of omponent n ommodty n the total vale of omponent nlded n all ommodte: β = γ γ p p The oberved pre a well a the tehnal oeffent of an aggregate of ommodte n a gven regon ompted a the weghted average of pre of the nvolved ommodte by ther repetve prodton hare n the total prodton. We heed the valdty of th mplfed model on oberved data n year 2 n a perfet eqlbrm framewor. We then modfed th valdated mplfed model to nlde mperfet ompetton ampton ng the methodology preented n the prevo eton. The followng fgre repreent the maret eqlbrm when the fnal ommodty prodt proded by a monopoly when qota are bndng. We onder two demand for ml the derved demand for ndtral prodt nd and the derved demand for fnal onmpton prodt ft. The aggregate demand for ml th ft nd. The eqlbrm pre n a perfet ompetton framewor th P p. The monopoly eqlbrm or when the total margnal revene rve n ml or omponent eqvalent whh eqal to the m of margnal revene from ndtral fnal onmpton ommodte and the derved demand for ndtral prodt nd MR ft nteret the ml pply rve. When qota are bndng the eqlbrm pre for ndtral prodt gven by p nd eqal to the margnal ot of prodton at the eqlbrm pl a potve qota rent. The pre for fnal onmpton ommodte obtaned on the demand rve for FCT ft. The atal pre pad to ml proder P nd amng that ml proder get the qota rent. Then the pre for farmer gven by P nd and proeor of fnal ommodty prodt get a rent eqal to P ft - P nd

13 Ml Spply Pft Pp ft nd Pnd MRft nd ft Qota rent Cm Cmd MRft MRnd Fgre 1: Maret eqlbrm n a monopoly framewor In the nt eton we wll ompare the maret eqlbrm for dfferent mperfet ompetton taton. 4. Smlaton relt We ompare the relt from for enaro whh orrepond to dfferent ampton on ompetton between frm. In enaro 1 perfet ompetton amed n the two regon and for the two prodt. Th enaro ed a a referene enaro. In enaro 2 we ame that FCT proded by a monopoly n eah regon. In enaro 3 we ame that n eah regon FCT proded by 1 frm that ompete à la Cornot. Fnally n enaro 4 we ame that n eah regon FCT and IN are proded by 1 frm whh ompete à la Cornot. Table 3 preent the man relt. When only one frm prode FCT n eah regon the ml qota no longer bndng and the eqlbrm prodton for fnal prodt hange. Total prodton of FCT dereae whle total prodton of IN nreae. In both regon frm rede ther prodton of FCT n order to tae advantage of ther monopoly power. Th ha a negatve effet on the ml pre whh nde an nreae n the prodton of IN. The redton n ml ot generate a dereae n the prodton ot and th n the pre of IN. Then the onmpton nreae n eah regon. However the nreae n IN prodton only tre at the aggregate level bt not at the regonal level. Fnally a the margnal ot of prodton for IN dereae the EU port of IN to the ret of the world nreae ompared to the perfet ompetton enaro

14 The demand for FCT hghly nelat and ontrary to IN FCT pre dramatally nreae. Another oneqene the nreae n ntra-trade. Note that there ome blateral dmpng a eah frm ell t prodt n the other EU regon at a pre lower than the pre et n t own regon. Even f the pre of FCT now dramatally hgher than the world maret pre the EU port for FCT do not dereae a ompared to the perfet ompetton ae. Th beae frm drmnate pre among ontre. On the one hand frm wll rede ther port on world maret n order to tae advantage of ome maret power however world maret are mh more elat than domet one whh lmt the ere of maret power. On the other hand ml pre lower and ompettvene of FCT ha th nreaed. Th ha a potve mpat on the level of port. Moreover the preene of maret power generate a dramat hange n ml omponent pre. Both prodt IN and FCT reqre the tlaton of the two ml omponent bt n dfferent proporton. FCT ontan proportonally more proten and IN ontan more fat. A a relt the demand for proten dereae more than the demand for fat a the prodton of FCT gnfantly fall. Th nde an nreae n the pre of fat and a dereae n the pre of proten. Thee hange n fat and proten pre lead to a dereae n farm ml pre a a relt of the dereae n the global demand for ml and to a dereae n the prorement ot of raw materal for the two ndtre. Fnally the monopoly n FCT prodton ental a bg hange n welfare dtrbton. Th a oneqene of the ampton on the elatty of demand for FCT whh allow hge mar-p on th maret. However a a oneqene of maret power the farmer rpl reded the onmer rpl reded the proeor rpl nreaed the taxpayer ot nreaed followng to the nreae n port and global welfare reded. When the maret power lower enaro 3 relt are mlar to the one of the eond enaro. The maret eqlbrm haraterzed by a redton n ml pre a hange n omponent pre an nreae n FCT pre larger EU port and hange n the dtrbton of rpl a well a n global welfare. However a loer loo reveal qaltatve dfferene. Now the dereae n FCT prodton lower than n the monopoly ae and the qota on ml prodton are bndng. Moreover mplt qota on omponent fat and proten alo reman bndng. Th plan why the prodton of IN and FCT reman ontant n both regon a ompared to the referene enaro. In other term de to the qota on ml prodton the referene enaro mplement a olton where the prodton of IN and FCT are already retrted a ompared to ther level wthot qota. The ere of maret power whh baally to retrt prodton th e a mlar mehanm that to lmt prodton. In th ae the maret eqlbrm wth maret power h that frm fnd proftable to e the totalty of the ml qota and th they do not retrt more the prodton of FCT. If the tene of ome maret power on FCT prodton doe not hange the qantty proded t hange the mplt pre of fat and proten. e to the ontrant on fat and proten there t a zone for whh the ere of maret power ha an mpat on omponent

15 pre on qantte old n eah maret and on trade bt not on the total qantte that are proded. We get th relt beae we onder two omponent and only two prodt n th model. Th ontran the olton a t wold be the ae f we had ondered only one prodt ng one raw materal. When we onder that both etor are bet to mperfet ompetton enaro 4 we fnd mlar relt bt whh now apply to the two etor. Table 3. - ary maret eqlbrm for dfferent ampton on mperfet ompetton Senaro 1: Perfet ompetton Senaro 2: Monopoly for FCT Senaro 3: n FCT =1 n IN = Senaro 4: n FCT =1 n IN =1 North Soth EU North Soth EU North Soth EU North Soth EU Pre /nt MILK FAT PTN IN FCT ml ot /g IN FCT Qota rent Prodton MILK IN FCT Conmpton IN FCT Trade n IN from North from Soth to Row Trade n FCT from North from Soth to Row Srpl M Farmer Proeor Conmer Taxpayer Welfare In table 4 we brefly analye the mpat of removng port bde for the dfferent ompetton ampton. Relt how that removng port bde nreae welfare whatever the trtre of the ndtry. The welfare gan re wth the ere of maret power

16 However n term of welfare the ere of maret power n th etor of prodton haraterzed by rather low demand elatte old ot a mh a the pre dtorton nded by port bde. Indeed n or mlaton the preene of port bde lead to a net ot of arond 1 bllon whh roghly orrepond to the ot n welfare from the maret power ered by an ndtry ompoed by 1 frm prodng eah ommodty n eah ontry. It doe not mean that removng port bde not a good poly bt that mperfet ompetton may alo potentally be an mportant ore of welfare loe. Table 4. - ary maret eqlbrm wth no port bdy for dfferent ampton on mperfet ompetton M Senaro 1: Perfet ompetton Senaro 2: Monopoly for FCT Senaro 3: n FCT =1 n IN = Senaro 4: n FCT =1 n IN =1 Srpl EU farmer EU proeor EU onmer EU Welfare Welfare lo de to mperfet ompetton Inreae n welfare de to port bdy removal Conldng remar The above analy ha hown how the ntrodton of maret power n the patal dary ndtry model hange the maret eqlbrm haratert. The man qaltatve relt of or mlaton ere howed that the tene of maret power on ome maret: gnfantly modfe the mplt pre of ml omponent; old lead to an nreae n EU port a frm pre drmnate among ontre; wth maret power domet pre not the adeqate ndator of ompettvene; modfy dramatally the dtrbton of rpl among agent; potentally an mportant ore of welfare loe. Loe from maret power ere old be a hgh a welfare loe generated by dtortng pole h a port bde poly. To onlde th analy gget that agrltral eonomt hold devote mh more attenton to mperfet ompetton n the agrltral and food etor. Th mplfed model of the dary ndtry hold now be tended to analye a more general model that allow for alloaton of ml omponent nto everal proeed ommodte to analye preely how maret power modfe the alloaton of ommodte

17 Referene Armngton P. S A Theory of emand for Prodt tnghed by Plae of Prodton Internatonal Monetary Fnd Staff Paper 16: Boamra-Mehemahe.; J.P. Chava; T. Cox; V. Réqllart 22 EU dary poly reform and ftre WTO negotaton: a patal eqlbrm analy Jornal of Agrltral Eonom. 532:4-29. Boamra-Mehemahe Réqllart and Soregarol 24 Imperfet Competton and ary Indtry Modellng EIM worng paper WP3-24. Brander J. and P. Krgman 1983 A Reproal dmpng Model of Internatonal Trade Jornal of Internatonal Eonom Chaaban J. 24 The determnant of maret trtre Ph.. The Unverty of Toloe 1 Frane. Gohn A. and H. Gyomard 2 Mearng Maret Power for Food Retal Atvte: Frenh Evdene Jornal of Agrltral Eonom 512: Hahmoto H A patal Nah eqlbrm model n Spatal Pre eqlbrm: advane n theory omptaton and applaton paper preented at the 31 t North Ameran Regonal Sene Aoaton Meetng held at enver Colorado USA Edted by P. TP. Herer Sprnger. Kawagh T. N. Sz and H.M. Kaer 1997 A Spatal Eqlbrm Model for Imperfetly Compettve Mld Maret Ameran Jornal of Agrltral Eonom 79: MCorrton S. 22 Why Shold Imperfet Competton Matter to Agrltral Eonomt? Eropean Revew of Agrltral Eonom 2229: Nelon C. H. and MCarl A Inldng perfet ompetton n patal eqlbrm model Canadan Jornal of Agrltral Eonom 32:55-7. Taayama T. and G.G.Jdge 1971 Spatal and Temporal Pre and Alloaton Model North-Holland Pblhng Company Amterdam London. ang C. W. Hwang M. J. and Sohng S. N. 22 The Cornot ompetton n the patal eqlbrm model Energy Eonom 24: