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Market power and subsidies in the Indonesian palm oil industry

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  • Chalil, Diana

Abstract

Cooking oil is known as an essential commodity in Indonesia. Having such an important role, the Indonesian government often interfered the cooking oil market to assure its price remain low. To do so, the government uses a subsidy policy as one of its instruments. A dynamic duopoly model is applied to evaluate the impact of subsidies given the structure of the industry. Estimation results suggest an evidence of both an increase in the consumer surplus but a decrease in aggregate welfare due to market power. A possible reason is proposed, but, in order to obtain a clear explanation, further research is required.

Suggested Citation

  • Chalil, Diana, 2008. "Market power and subsidies in the Indonesian palm oil industry," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6022, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare08:6022
    DOI: 10.22004/ag.econ.6022
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    References listed on IDEAS

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    Keywords

    Agricultural Finance; Crop Production/Industries; Demand and Price Analysis;
    All these keywords.

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