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Estimating the Market Power of Traders in the Arabica Coffee Value Chain in Lam Dong, Vietnam

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  • Nguyen Thi Tuoi

    (Department of Agriculture and Forestry, Dalat University - Da Lat, Vietnam Ph.D. student, Can Tho University, Can Tho, Vietnam)

  • Nguyen Phu Son

    (Department of Economics, Can Tho University, Can Tho, Vietnam)

  • Pham Le Thong

    (Department of Economics, Can Tho University, Can Tho, Vietnam)

Abstract

Although some studies have assessed the market power of advanced degrees in Vietnam’s agricultural sector, this research only focuses on analyzing the level of market concentration through CR4 or HHI indexes. The stochastic cost frontier can estimate market power using the Lerner ratio when input price data are not available and with or without constant returns to scale. Thus, the stochastic cost frontier with a maximum likelihood approach of Kumbhakar et al. (2012) is used to assess the market power of traders in the coffee value chain in Lam Dong province, Vietnam. The estimated market power and Lerner rate results are 0.0001. This index shows that the local coffee market is a market with perfect competition. So the traders do not have market power. Thus, there is no collusion between coffee traders to lower the purchase price for farmers or increase the price for processors and exporters. An RTS ratio of 0.96 (less than one) shows that the return to scale for traders is decreasing. This number proves that the degree of competition in the local coffee market among traders is very high.

Suggested Citation

  • Nguyen Thi Tuoi & Nguyen Phu Son & Pham Le Thong, 2021. "Estimating the Market Power of Traders in the Arabica Coffee Value Chain in Lam Dong, Vietnam," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 7(3), pages 102-108, 09-2021.
    • Handle: RePEc:arp:ijefrr:2021:p:102-108
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    References listed on IDEAS

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