AbstractA multistage allocation model is designed to deal with two real‐world conditions that are bothersome in the application of spatial equilibrium models to the dairy industry. The multidimensional nature of milk allocation and the diversity of competitive structure within the industry must be faced to obtain realistic results. A set of recursive relations incorporating linear and quadratic programming formulations is used to handle the temporal and product‐use dimensions in addition to the spatial dimension. An application of the model to the New England dairy industry traces price, production, and consumption patterns over time.