Direct-selling farming and urban externalities: what impact on products quality and market size?
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In this paper, we study how the proximity to cities affects the decision of farmers to enter the direct-selling market in presence of spatial heterogeneity in agricultural yields. We develop a theoretical model which takes into account the externality of urban pollution and market access costs on direct-selling profits. We find that regions hosting an intermediate-size city are more likely to supply a wider range of direct-selling varieties. Additionally, we highlight that spatial heterogeneity in productivity creates distortions in competition between farmers, and can have concomitant undesired effects on both the quality and the range of available varieties.