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Published byMary Irma Shaw Modified over 9 years ago
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Perfect Competition Large number of buyers and sellers No product differentiation Low barriers to entry and exit Perfect and equal information No price restrictions & no collusion
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Market Individual S D d s=MC Farmer’s as price takers
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Consequences of Perfect Competition Individuals are price takers profits by costs Cost - price squeeze Don’t perceive horizontal competition Marketing decisions are »Time, place, and form
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Monopoly One seller Price setter »Firm supply is the market supply Examples »Utilities, cable TV »Often regulated
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D MRQ PS QMQM PMPM MR=MC PCPC Monopoly Supply and Demand
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Monosony One buyer Price setter »Firm demand in market demand Depend on market definition »Time, form, place
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Monopoly / Monosony Success depends on »Barriers to entry »Closeness of substitutes Regional markets ????
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Oligopoly / Oligopsony Few sellers or buyers Individuals can influence price »Co-exist with rivals »More stable prices Optimal output is less than profit max output for any one firm
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Oligopoly / Oligopsony Often price leader/follower Emphasis on non-price comp. Examples »Autos, farm equipment, cereals
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Oligopoly / Oligopsony Incentive to try cartels »Work together to set supply or price Some government sponsored »OPEC »Marketing Boards »Illegal in US
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Monopolistic Competition Between olig and perfect comp. Relatively few firms Many close substitutes Try to differentiate product
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Monopolistic Competition Very elastic demand Prices nearly alike as consumers will switch Emphasis on non price comp. »Pricing strategy »Carcass merit, value based marketing
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Structure and performance Perfect competition will produce output and aggregate price with the greatest operational efficiency Monopoly has the lowest operational efficiency
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Structure and performance Olig & Mono Comp »In between perfect and monopoly »Often lead to: –Excess capacity –Excess non-price competition
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Competitive Conditions Farm markets are near perfect competition but changing »Product differentiation »Branded products »Advertising »Promotion
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Market Concentration Percent of sales by largest firms 4 firm concentration ratio CR4 »Strong olig CR4 > 50% »Weak olig CR4 33-50% »Unconcentrated CR4 < 33 Competition as concentration All types in Ag
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CR4 in Ag Cattle slaughter67 Steer and heifer slaughter80 Hog slaughter56 Soybean mills71 Fluid milk 22 Poultry processing34 Breakfast cereal85
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Leaders Beef »IBP/Tyson, Excel/Cargill, Swift/Conagra, Farmland, Smithfield Pork »Smithfield, IBP/Tyson, Excel/Cargill, Hormel
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Leaders Grain Handling »ADM, Cargill, Bunge, Cenex Harvest States, Peavey/Conagra Ag Chemicals »Bayer CropScience (Aventis), Syngenta, Monsanto, BASF, Dow Agrosciences Seeds »DuPont (Pioneer), Monsanto, Syngenta, Groupe Limagrain, Grupo Pulsar
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Concentration and Market Definition Iowa steer and heifer slaughter US steer and heifer slaughter US cattle slaughter All livestock slaughter All protein production
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Barriers to Entry Key resources »Inputs, $$$, skills »Patent Economies of scale Location Information
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Workable Competition Enough buyers and sellers to provide alternatives No one can coerce a rival Firms respond to profit and loss
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Workable Competition No collusion Enough entry and exit for rivals to challenge Free access of buyers and sellers
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Role of Government Prevent or regulate monopoly Anti-trust laws to prevent some types of behavior Coop laws to strengthen smaller firms by banning together
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Government Regulations Grain Inspection, Packers and Stockyards Administration (GIPSA) »Division of USDA »Regulation of markets and trade »http://www.usda.gov/gipsa/aboutus/bkgd2.htm Federal Trade Commission »Anti-Trust investigations Attorney General (State)
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Concentration summary More narrowly defined markets are more concentrated Integration is not concentration Economies of scale »Plant or firm level economies »May drive concentration
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