Pricing policy under Double Market Power: Madagascar and the International Vanilla Market
This paper uses a price leadership model of the international vanilla market to study the welfare consequences of alternative pricing policies for Madagascar, the leader in the vanilla market, that also controls domestic production through a single-channel marketing system. Econometric estimates of the model are used for simulations of welfare and revenue gains and losses and internal redistribution of income from alternative pricing policies. The results indicate that Madagascar could have gained between 0.9 to 2.6 percent of GDP per year on average over the period 1981-91 by following optimal pricing policies, and that producers were overtaxed suggesting that political economy considerations played a role in the pricing decisions.
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|Date of creation:||1996|
|Date of revision:|
|Publication status:||Published in Review of Development Economics, February 2000, pages 1-20|
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