ABSTRACT
Spatial competition is an important factor in the food industry. Food processors have to decide where to locate their processing facilities, and those location decisions are influenced not just by the location of farmers producing needed ingredients and retailers who want to buy the product but also by the location of other competing processors. Retailers also must choose locations, deciding where to place stores relative to the location of both their customers and competitors. There are benefits from locating away from your competitors and benefits from locating near competitors. As we will see, the particular features of an industry determine which benefits are larger and whether firms in a specific sector of the food industry tend to disperse spatially or cluster together. A second feature of spatial competition is price competition. Firms choose not only where to locate their business but also what price to set, and both of these decisions are done while considering your competitors and their likely responses to your choices. This chapter will explore some spatial competition models and how the results of these models translate into what we see in the food industry.
