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Returns to Public Investments in Agriculture with Imperfect Downstream Competition
Author(s) -
Hamilton Stephen F.,
Sunding David
Publication year - 1998
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1244067
Subject(s) - imperfect competition , upstream (networking) , downstream (manufacturing) , competition (biology) , production (economics) , industrial organization , product (mathematics) , imperfect , economics , perfect competition , agriculture , distribution (mathematics) , economic surplus , welfare , product market , food processing , scale (ratio) , microeconomics , business , market economy , operations management , philosophy , mathematics , computer network , ecology , linguistics , mathematical analysis , computer science , biology , geometry , quantum mechanics , physics , incentive , food science , chemistry
A multiple‐market framework is developed to measure the size and distribution of research benefits. The model considers an upstream raw product market and a downstream finished productmarket and allows for imperfect competition in the intermediary food‐processing sector. A central conceptual result is derived: an increase in raw product output is a sufficient condition for cost‐reducing innovations in the farm sector to increase social welfare. A special case of linear farm supply and isoelastic processing production functions reveals that necessary conditions for welfare to decrease are a convergent farm supply shift, an oligopsonistic upstream market configuration, and increasing returns‐to‐scale processing technology.