Development of Spatial Equilibrium Model Introducing the Oligopolistic Processors

In this article, we developed a spatial equilibrium model, incorporating a oligopolistic processing firm. The oligopolistic processing firm is characterized as the firm which can hold a great control over their products prices against the producers in a factor market and the consumers in a product market. The spatial equilibrium model can be described as the model with the considerations of both demand-monopolistic and supply-oligopolistic markets. Also, analyses simulations under the four scenarios of a perfectly competitive in both raw material market and processed goods market, supply-oligopolistic in processed goods market, demand-monopolistic in raw material market, both supply-oligopolistic in processed goods market, demand-monopolistic in raw material market, with the use of the model are performed. Accordingly, the following facts are yielded: 1） In terms of the equilibrium quantities, the perfectly competitive market is greater than supply-oligopolistic market and the demand-oligopolistic market is greater than demand-monopolistic and supply-oligopolistic market. 2） under demand-monopolictic/supply-oligopolistic markets, The price difference is smaller than the demand-monopolistic and supply-oligopolistic market. 3） The profitability of the producers and distributors is calculated by multiplying the equilibrium quantities and the price differences. Based on the results of the analyses, two significant findings are derived in developing the model: it is necessary 1） to have a clear understanding of economic entities and distribution channels, and 2） to carefully deal with a market structure in which these economic entities participate