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Price Rigidity and Industrial Concentration: Evidence from the Indonesian Food and Beverages Industry

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  • Maman Setiawan
  • Grigorios Emvalomatis
  • Alfons Oude Lansink

Abstract

type="main"> This paper investigates the relationship between industrial concentration and price rigidity in the Indonesian food and beverages industry. A Cournot model of firm behavior is used in which prices adjust according to a partial adjustment mechanism. The model is applied to panel data of the Indonesian food and beverages industry over the period 1995–2006. The results suggest that industrial concentration has a positive effect on percentage price changes. Furthermore, the speed of price adjustment is higher when the per unit cost of production rises.

Suggested Citation

  • Maman Setiawan & Grigorios Emvalomatis & Alfons Oude Lansink, 2015. "Price Rigidity and Industrial Concentration: Evidence from the Indonesian Food and Beverages Industry," Asian Economic Journal, East Asian Economic Association, vol. 29(1), pages 61-72, March.
  • Handle: RePEc:bla:asiaec:v:29:y:2015:i:1:p:61-72
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    File URL: http://hdl.handle.net/10.1111/asej.12047
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    References listed on IDEAS

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    1. Elizabeth Caucutt & Mrinal Ghosh & Christina Kelton, 1999. "Durability Versus Concentration as an Explanation for Price Inflexibility," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 14(1), pages 27-50, February.
    2. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-658, September.
    3. Aaronovitch, S & Sawyer, Malcolm C, 1981. "Price Change and Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 30(2), pages 137-147, December.
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    5. Louis Phlips, 1980. "Intertemporal Price Discrimination and Sticky Prices," The Quarterly Journal of Economics, Oxford University Press, vol. 94(3), pages 525-542.
    6. Paul M. Sweezy, 1939. "Demand Under Conditions of Oligopoly," Journal of Political Economy, University of Chicago Press, vol. 47, pages 568-568.
    7. PHLIPS, Louis, 1980. "Intertemporal price discrimination and sticky prices," CORE Discussion Papers RP 405, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Phlips, Louis, 1969. "Business Pricing Policies and Inflation-Some Evidence from E.E.C. Countries," Journal of Industrial Economics, Wiley Blackwell, vol. 18(1), pages 1-14, November.
    9. George J. Stigler, 1947. "The Kinky Oligopoly Demand Curve and Rigid Prices," Journal of Political Economy, University of Chicago Press, vol. 55, pages 432-432.
    10. Weiss, Christoph R., 1995. "Determinants of price flexibility in oligopolistic markets: Evidence from austrian manufacturing," Journal of Economics and Business, Elsevier, vol. 47(5), pages 423-439, December.
    11. Bedrossian, Arakel & Moschos, Demetrios, 1988. "Industrial Structure, Concentration and the Speed of Price Adjustment," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 459-476, June.
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    Cited by:

    1. Maman Setiawan & Grigorios Emvalomatis & Alfons Oude Lansink, 2013. "Structure, conduct, and performance: evidence from the Indonesian food and beverages industry," Empirical Economics, Springer, vol. 45(3), pages 1149-1165, December.
    2. G. R. Chen, 2016. "Dynamic Model for Market Competition and Price Rigidity," Applied Economics, Taylor & Francis Journals, vol. 48(36), pages 3485-3496, August.

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