| The competition between Florida and Brazil in two major orange juice markets, the U.S. and Europe, is investigated. The competition is viewed as a dynamic process due to the seasonal nature of production, and a presumed spatial and intertemporal optimization practiced by the market participants. The overall objective of the study is to develop short-run dynamic competition models of the frozen concentrate orange juice (FCOJ) market with particular emphasis given to marketing decisions on quantity and pricing, spatial allocation, and inventory strategies.; Literature related to dynamic optimization and production-inventory theory is reviewed. Relevant theory of industrial organization/economics and the theory of dynamic games are surveyed, emphasizing particularly duopolistic models. Some previous orange-juice-related studies are also reviewed. Different and often conflicting schools of thoughts about imperfect competition, duopolistic competition in particular, are briefly evaluated.; While by no means ideal, a balance between theoretical and practical/empirical purposes has been attempted throughout this study. Two theoretical models, quantity and price games, are developed. A dynamic game-theoretic approach is used in this study to derive analytical solutions of the models, which are formulated as noncooperative differential games, and to characterize the properties of optimal strategies. Due to the structure of the models, which is state separable, the open-loop solutions coincide with the feedback solutions. Conjectural variations were evaluated to derive particular strategies such as Nash and Stackelberg. Explicit solutions were derived based on linear (inverse) demand functions for (quantity) price games. The empirical analysis is carried out to examine market conduct, assuming that a profit maximizing objective was pursued through an integrated spatial and intertemporal pricing and inventory strategy employed by Florida and Brazilian FCOJ processors across a short-run (one year) time horizon. The estimation was based on a three season (1990/91-1992/93) sample period. The study shows that the price game model provides slightly better results to portray the competition in the international FCOJ market. Overall, the results show the appropriateness of the approach to the system under study. Rational behavior, that is profit maximization in this case, is an appropriate assumption in investigating the FCOJ market. |
