A Spatial Equilibrium Model for Imperfectly Competitive Milk Markets

Abstract A generalization of Takayama and Judge's spatial equilibrium model that allows for any degree of market structure is presented. The model is applied to the Japanese dairy industry to examine interregional milk movements generated under alternative assumed degrees of market competition. The results indicate that the perfect competition and monopoly equilibrium solutions result in a lower and a higher price, respectively, than actual price levels. On the other hand, the Cournot‐Nash equilibrium solutions are the most similar to actual observations, and the actual interregional milk movements are best explained by imperfectly competitive behavior.