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Pricing Policy Under Double Market Power: Madagascar and the International Vanilla Market

Author

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  • de Melo, Jaime
  • Olarreaga, Marcelo
  • Takacs, Wendy E

Abstract

This paper uses a price-leadership model of the international vanilla market to study the welfare consequences of alternative pricing policies for Madagascar – a country that controls domestic production through a single-channel marketing system and is the leader in the vanilla market. 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 0.9–2.6% 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.

Suggested Citation

  • de Melo, Jaime & Olarreaga, Marcelo & Takacs, Wendy E, 1996. "Pricing Policy Under Double Market Power: Madagascar and the International Vanilla Market," CEPR Discussion Papers 1447, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1447
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    Cited by:

    1. Hoekman, Bernard & Saggi, Kamal, 1999. "Multilateral disciplines for investment-related policies," Policy Research Working Paper Series 2138, The World Bank.
    2. Yilmaz, K., 1999. "Nash and Stackelberg Optimum Export Taxes," Papers 99/04, Koc University.
    3. Maret, Fenohasina, 2007. "Distortions to Agricultural Incentives in Madagascar," Agricultural Distortions Working Paper Series 48551, World Bank.
    4. Khalid Khan & Chi-Wei Su & Adnan Khurshid & Muhammad Umar, 2022. "Are there bubbles in the vanilla price?," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 10(1), pages 1-16, December.
    5. de Melo, Jaime & Cadot, Olivier & Dutoit, Laure, 2006. "The Elimination of Madagascar's Vanilla Marketing Board, Ten Years On," CEPR Discussion Papers 5548, C.E.P.R. Discussion Papers.
    6. Jaime DE MELO & Marcelo OLARREAGA, 2017. "Trade Related Institutions and Development," Working Papers P199, FERDI.
    7. Morisset, Jacques, 1997. "Unfair trade? Empirical evidence in world commodity markets over te past 25 years," Policy Research Working Paper Series 1815, The World Bank.
    8. Rakotoarisoa, Manitra A. & Shapouri, Shahla, 2001. "Market power and the pricing of commodities imported from developing countries: the case of US vanilla bean imports," Agricultural Economics, Blackwell, vol. 25(2-3), pages 285-294, September.
    9. Kamil Yilmaz, 2006. "How much should primary commodity exports be taxed? Nash and Stackelberg equilibria in the Global Cocoa Market," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(1), pages 1-26.
    10. Hoekman, Bernard & Holmes, Peter, 1999. "Competition policy, developing countries, and the World Trade Organization," Policy Research Working Paper Series 2211, The World Bank.

    More about this item

    Keywords

    Income Distribution; Marketing Boards; Monopoly Power; Monopsony Power; Optimal Pricing;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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