Abstract

Product differentiation on sweeteners market : an analysis model. The European sweetener market is higbly influenced by the regulation. Sucrose market is a reserved one and price and quantifies are guaranted. EC prices are bigher than world prices and the production of the main competitors of sucrose, namely "high fructose corn syrup" (HFCS) produced from cereals, are restricted to about 2% of the market. In the whole, few European researchers have analysed this competition between sweeteners and its implications for agricultural policy. Smith (1978) analyses the trend of sweeteners markets (sugar from beet and HFCS from cereals) and its implications for economie policy. In particular he shows the differences between the US and EC situations. Even in the EC, the author suggests that a liberalization ofHFCS market allows it to take some market share to sugar in particular in countries like Italy where beet production is still adapted. The aim of this paper is to characterize the competition between cereal and sugar beet sweeteners. We focus on the imperfect compétition on this market with the help of models where the product differentiation is explieitely taking into account (address model of product differentiation à la Hotelling, 1929). The consumers program imply a vertical differentiation model where the consumers have différent fastes between the offering qualifies (following Mussa and Rosen, 1978 and Champsaur and Rochet, 1989). Nevertheless minimising provision costs could imply to use more than one kind of product when starch sweeteners are not sufficiently substituable with the sucrose. We show that microeconomic analysis of consumers andfirms behaviours on this specifie market allows us to throw back into question several of generally accepted ideas based on econometric results of demandin the US market (Lopez and Sepulveda, 1983). In particular, we define a price map characterized by some areas where products benefit in fact of a monopoly power and by others areas where there is effective competition. Simulations on final demand of sweeteners in France and EC are also presented according to différent assumptions on régulation and prices (we distinguish ten sectors of consumption). It appears that within small differences of prices, the cereal sweeteners could take over sugar markets for some particular uses such as soft drinks. When sugar prices are about 20 % higher that HFCS prices, substitution in sweeteners coule represent a quar- ter of the total demande in sugar. In comparison with the US market, where HFCS replace about 50 % of sugar, this market for HFCS is rather small. This is mainly due to the différences in the structure of consumption.

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