Behavioral Dynamics of Market Power and Price Volatility in the Marketing Chain of Horticultural Products in Iran

Document Type : Research Paper

Authors

1 Phd student, Faculty of Agriculture, Payame Noor University, Tehran, Iran

2 Associate Professor, Faculty of Agriculture, Payame Noor University, Tehran, Iran

Abstract

Concerns about market power and anti-competitive behavior in the agricultural sector are widespread, with studies showing that farmers are structurally in a weaker position than other market players, and that stronger supply chain actors systematically abuse their power over farmers and consumers. Therefore, this study investigates and estimates the behavior of market power in the marketing chain of horticultural products (for the case of orange fruits), using the Lerner index and the mark-up econometric model for the weekly product price data in the period of years 1394-99. The results of the Lerner index estimation show that the market power of wholesalers and retailers are 48% and 38% respectively. The obtained market power of 38% can be interpreted as follows: the 38% difference between retail and wholesale price is related to market power and 62% of this difference is based on the final cost. In other words, by using their market power, retailers have been able to charge 38% more than the price that was set based on the equality of the price with the final cost, according to the competitive market condition. Also, the results of the mark-up model also show the impact of price changes in each market level on the market power of other market levels.

Keywords

References

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History

  • Receive Date: 21 August 2022
  • Revise Date: 26 September 2022
  • Accept Date: 01 October 2022

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