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Buyer and Seller Concentration in Global Commodity Markets

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  • Reza Oladi
  • John Gilbert

Abstract

Commodity markets may be characterized by concentration on the buyer side, with a small number of transnational intermediary firms purchasing from supplying countries and distributing to the market. In many cases, developing economies may have little choice but to sell through these intermediaries, and recent work has suggested the export taxes may be an optimal policy to recapture some of the monopsony rent. However, in many commodity markets there are a limited number of large supplying countries. Even if the markets are competitive, this supply-side concentration suggests that economies have market power themselves, and that the governments of the countries may be engaged in a strategic game when selecting trade policies. We consider a situation where an oligopsonistic intermediary industry purchases from a small number of supplying countries, the governments of which act strategically in their policy choices both with respect to the intermediaries and any competing suppliers. In the resulting two-stage game, we show that an export subsidy may arise as the optimal intervention.

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File URL: http://hdl.handle.net/10.1111/j.1467-9361.2012.00667.x
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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 16 (2012)
Issue (Month): 2 (05)
Pages: 359-367

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Handle: RePEc:bla:rdevec:v:16:y:2012:i:2:p:359-367

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References

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  1. Alan V. Deardorff & Indira Rajaraman, 2009. "Buyer Concentration in Markets for Developing Country Exports," Review of Development Economics, Wiley Blackwell, vol. 13(2), pages 190-199, 05.
  2. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  3. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  4. Nese, Gjermund & Straume, Odd Rune, 2004. "Industry concentration and strategic trade policy in successive oligopoly," Working Papers in Economics 10/04, University of Bergen, Department of Economics.
  5. Van Long, N. & Soubeyran, A., 1996. "Cost Heterogeneity, Industry Concentration and Startegic Trade Policies," G.R.E.Q.A.M. 96a39, Universite Aix-Marseille III.
  6. De Santis, Roberto A, 2000. "Optimal Export Taxes, Welfare, Industry Concentration, and Firm Size: A General Equilibrium Analysis," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 319-35, May.
  7. Gjermund Nese & Odd Straume, 2007. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," Experimental Economics, Springer, vol. 7(1), pages 31-52, March.
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Cited by:
  1. Baake, Pio & Huck, Steffen, 2013. "Crop failures and export tariffs," Discussion Papers, Research Unit: Economics of Change SP II 2013-315, Social Science Research Center Berlin (WZB).
  2. Pio Baake & Steffen Huck, 2013. "Crop Failures and Export Tariffs," Discussion Papers of DIW Berlin 1342, DIW Berlin, German Institute for Economic Research.

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