Abstract
This paper proposes a model for vertical relationships in several agribusiness sectors for which differences in terms of quality exist in the end-market. Intermediaries justify their position on the grounds of their exclusive access to a market segment (high quality), whereas producers retain the right to supply the low-quality market directly. Our model takes into account the diversity of consumers' tastes, and a possible extra marketing cost for direct access to the market by the producer. We demonstrate that when the producer can commit in advance to supplying the available capacity in full, then in certain conditions the efficiency of a vertically integrated sector can be restored (level of production and allocation to qualitative segments). Copyright 1999 by Oxford University Press.
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