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This article investigates the determinants of agricultural households' product commercialisation in Kosovo in 2005, and in particular whether the integration of farms into input markets plays a role. Using data from a survey of 4187 agricultural households, a two-stage selection model is used, taking account of potential endogeneity of input prices. Results show that high labour price and low land availability are strong impediments to commercialisation of agriculture in the region.

We analyze third degree price discrimination by an upstream monopolist to a continuum of heterogeneous downstream firms. The novelty of our approach is to recognize that customizing prices may be costly. As a consequence, partial price discrimination arises in equilibrium; in particular, we show that inefficient downstream firms receive personalized prices whereas efficient firms are charged a uniform price. The extreme cases of complete price discrimination and uniform price arise in our setting as particular cases, depending on the cost of customizing prices. Financial support from SEJ 2004-02172, SEJ 2007-67895, SEJ 2007-62656, FEDER funds and the IVIE is gratefully acknowledged.

An upstream supplier that is constrained both by downstream competition and the threat of demand-side substitution faces a tradeoff between maximizing joint-profit and extracting surplus. Although joint-profit maximization calls for relatively high marginal wholesale prices in order to dampen intra-brand competition, surplus extraction will be higher when the supplier instead charges relatively low marginal wholesale prices. The reason is that by inducing more intra-brand competition through lower wholesale prices, the supplier makes it less attractive for downstream firms to switch to alternative sources of supply. We show how this can make it optimal for the supplier to disadvantage more efficient and thus ultimately larger buyers, thereby smoothing out differences in their market shares. We further show that despite the use of non-linear supply contracts, marginal wholesale prices and thus final goods’ prices will decrease when either downstream competition intensifies or the supplier becomes more constrained by the threat of demand-side substitution.