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Price Rigidity and Industrial Concentration: Evidence from the Indonesian Food and Beverages Industry
Author(s) -
Setiawan Maman,
Emvalomatis Grigorios,
Oude Lansink Alfons
Publication year - 2015
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/asej.12047
Subject(s) - indonesian , cournot competition , economics , rigidity (electromagnetism) , panel data , food industry , price elasticity of demand , agricultural economics , econometrics , microeconomics , food science , chemistry , philosophy , linguistics , structural engineering , engineering
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.