A Simple Model of Dairy Product Supply

Jung, Hanjoon Michael (2011): A Simple Model of Dairy Product Supply.

Abstract

Dairy products are characterized by two properties, namely, perishability and short-periodic production. These properties are so unique that conventional studies in agricultural economics or in industrial organization might not explain the dairy product supply well. Hence, to understand this dairy product supply, we model it based on these two properties. We find that these properties invite middlemen who can efficiently deliver the products, and give rise to economies of scale in transportation and accessibility advantage in the dairy product supply. The economies of scale in transportation arise because greater production reduces average delivery costs per unit. The accessibility advantage occurs because lowering delivery costs significantly reduces total transportation costs in the long term.

• Item Type: MPRA Paper
• Language: English
• Keywords: Accessibility Advantage, Dairy Products, Dairy Product Supply, Economies of Scale, Perishability, Short-periodic Production.
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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