Free-on-board and uniform delivery pricing strategies in a mixed duopsony

This paper analyses free-on-board (FOB) versus uniform delivery (UD) pricing policy choices in a mixed duopsony market. We use a two-stage game between a profit maximising investor owned firm and a cooperative which aims at maximising the welfare of its members. The results show that UD (FOB) pricing will be chosen by both competitors in markets where transportation costs are small (large) relative to the net value of the primary product. A mixed FOB-UD pricing equilibrium emerges for an intermediate market structure.