Premium
Farmers, Middlemen and Exporters: A Model of Market Power, Pricing and Welfare in a Vertical Supply Chain
Author(s) -
Bjorvatn Kjetil,
Milford Anna B.,
Sørgard Lars
Publication year - 2015
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12121
Subject(s) - monopsony , multinational corporation , welfare , market power , economics , supply chain , cash , power (physics) , business , microeconomics , market economy , monopoly , marketing , macroeconomics , finance , physics , quantum mechanics
Markets for cash‐crops in developing countries are typically characterized by a concentration of buyer power at different levels of the supply chain. For instance, small‐scale coffee farmers sell their produce to a middleman, who in turn sells the coffee onward to an exporter, often a foreign multinational, with monopsony power in the hands of the purchasers at both levels. We analyze pricing behavior and welfare with different assumptions regarding market power. In particular, we show that a more powerful exporter is likely to benefit the producers and may even lead to higher welfare for the producer country as a whole.