The Economics of Spatial Competition for Corn Stover
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This paper develops an empirical model of spatial competition in order to evaluate the effects of
alternative corn stover market structures on stover prices, supply of cellulosic biofuels, and firm
profits. We calibrate the model to market conditions in Indiana and show that spatial competition
may significantly increase feedstock cost, reduce profits of biofuels plants, and increase the price
of biofuel necessary to induce a given production target. On the other hand, spatial competition
causes firms to rely more on the intensive margin, increasing farmers’ share of the industry’s
surplus.