FRAGMENTED DUOPOLY - THEORY AND APPLICATIONS TO BACKWARD AGRICULTURE

The central aim of this paper is to provide a formal description of the idea of 'market fragmentation', which is so widely used to describe markets in backward agriculture. We begin by describing a 'fragmented duopoly' in which each seller has a captive set of customers and there is a non-captive set who may buy from either seller. The Nash-Cournot equilibria of the system are analyzed; and then the model is generalized to allow for the endogenous determination of the captive sets. The subgame perfect equilibrium of the model provides a useful background for studying familiar topics like fragmentation, interlinkage and disguised unemployment from a new point of view. © 1991.