Market Power in International Commodity Processing Chains: Preliminary Results from the Coffee Market
Vector autoregressions are used to model price transmission through the coffee processing chain, from producers to the world market and from the world market to consumers. A comparison is made of price dynamics against a backdrop of two very different market structures: pre-1989, producers exerted market power through export quotas and state- controlled marketing channels; post-1989, government interventions are minimal, but private actors at intermediary, processing and retailing levels have become quite concentrated. Interestingly, the analysis shows that liberalisation has not improved price transmission as significantly as expected and in some respects appears to have worsened it noticeably. One possible explanation is market power amongst private actors at intermediate levels in the processing chain.
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