While traders of agricultural products are known to often exercise market power, this power has rarely been quantified for developing countries. The paper aims to discuss this issue.
In order to derive a measure, the authors estimate the traders’ revenue functions and calculate the marginal value products directly from them. The authors subsequently find the determinants affecting their individual market power.
Results show that market power at the traders’ level exists and is substantial. This market power is amplified in situations of extreme remoteness, and weakens with increasing market size.
An exceptional data set with detailed information on the business practices of rubber traders in Jambi, Indonesia is employed with an innovative methodology to directly estimate revenue functions.
The authors gratefully acknowledge the financial support of the German Research Foundation (DFG) within Collaborative Research Centre 990. The traders’ survey data were compiled within the CRC 990. Jenny Aker (Tufts University), Todd Benson (IFPRI, Kampala), and Ruth Vargas Hill (IFPRI, Washington) were so kind to provide the blank questionnaires which they used for their respective trader surveys.
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