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Buyer and Seller Concentration in Global Commodity Markets

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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: ftp://repec.bus.usu.edu/RePEc/usu/pdf/eri2009-11.pdf
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Bibliographic Info

Paper provided by Utah State University, Department of Economics in its series Working Papers with number 200911.

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Length: 10 pages
Date of creation: 15 Sep 2009
Date of revision: 15 Sep 2009
Handle: RePEc:usu:wpaper:200911

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Keywords: Strategic export subsidies; export taxes; global commodity markets;

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  1. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  2. 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.
  3. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  4. Gjermund Nese & Odd Rune Straume, 2005. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," CESifo Working Paper Series 1439, CESifo Group Munich.
  5. Gjermund Nese & Odd Straume, 2007. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," Experimental Economics, Springer, Springer, vol. 7(1), pages 31-52, March.
  6. Van Long, N. & Soubeyran, A., 1996. "Cost Heterogeneity, Industry Concentration and Startegic Trade Policies," G.R.E.Q.A.M., Universite Aix-Marseille III 96a39, Universite Aix-Marseille III.
  7. Alan V. Deardorff & Indira Rajaraman, 2009. "Buyer Concentration in Markets for Developing Country Exports," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 13(2), pages 190-199, 05.
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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).

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