2005 Reports

Social Construction of Flows: Price Profiles Across Producers Gear to Market Context Upstream, Downstream and Cross-Stream

White, Harrison C.

Varieties of quality competition across a production market can be extrapolated out of two dual forms of competition, oriented upstream and downstream. Counter pressure for equally good deals interlocks with producers' own self-interested choices to maximize their profits. The mechanism is a profile in revenue versus volume, with a niche for each producer. Simplicity in valuation schedules used to describe context enables exact solutions across very wide ranges of contexts that can sustain profiles of given curvatures. Sizes, profitabilites, and market shares are surveyed, as well as benefits downstream. Impacts from substitutability with cross-stream markets are found to be major only for an intermediate band of sensitivity ratios, identified within an inventory space for production market contexts. These markets can be sustained even for increasing returns to scale for producers. Market solutions change dramatically when buyers' ranking of quality is inverse to the ranking of producers by cost structure.