The Economics of Spatial Competition for Corn Stover
By: Sesmero, Juan P.; Balagtas, Joseph V.; Pratt, Michelle
Sesmero, Juan P.; Balagtas, Joseph V.; Pratt, Michelle, The Economics of Spatial Competition for Corn Stover, Journal of Agricultural and Resource Economics, Volume 40, Issue 3, May 2015, Pages 425-441
This paper develops an empirical model of spatial competition in order to evaluate the effects of alternative corn stover market structures on stover prices, supply of cellulosic biofuels, and firm profits. We calibrate the model to market conditions in Indiana and show that spatial competition may significantly increase feedstock cost, reduce profits of biofuels plants, and increase the price of biofuel necessary to induce a given production target. On the other hand, spatial competition causes firms to rely more on the intensive margin, increasing farmers’ share of the industry’s surplus.