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Supply and Demand Model for a Chili Enterprise System Using a Simultaneous Equations System

Author

Listed:
  • Meuthia Rachmaniah

    (Computer Science Department, IPB University, Bogor 16680, Indonesia)

  • Arif Imam Suroso

    (School of Business, IPB University, Bogor 16151, Indonesia)

  • Muhamad Syukur

    (Agronomy and Horticulture Department, IPB University, Bogor 16680, Indonesia)

  • Irman Hermadi

    (Computer Science Department, IPB University, Bogor 16680, Indonesia)

Abstract

The supply and demand of various fresh chili types correspond to one another simultaneously because they can be complementary or substitute products. This study aimed to simultaneously examine the supply and demand model of red chili and cayenne peppers to support innovative chili enterprise system development. The methodology is the simultaneous equation system panel data using the years 2010–2020 time-series and provincial cross-sectional data combined with data mining techniques. The two-stage least square method was used for the estimation and simulation of the models. The results of the models comprise three identities and ten structural equations. The resulting models are all statistically fit with some drawbacks owing to the micro-level data availabilities. The simulations on the labor wages, prices, demand, and production for red chili and cayenne peppers affected the other variables within the model. In conclusion, the chili supply and demand models could support the development of the innovative chili enterprise system; however, this requires proactive collaboration and participation from all the relevant institutions and actors. Moreover, this research model is potentially applicable to other horticultural commodities.

Suggested Citation

  • Meuthia Rachmaniah & Arif Imam Suroso & Muhamad Syukur & Irman Hermadi, 2022. "Supply and Demand Model for a Chili Enterprise System Using a Simultaneous Equations System," Economies, MDPI, vol. 10(12), pages 1-21, December.
    • Handle: RePEc:gam:jecomi:v:10:y:2022:i:12:p:312-:d:995383
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    References listed on IDEAS

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    1. Ahn, Byeong-il & Im, Jeong-bin, 2016. "An equilibrium displacement approach to analyzing the effects of tariff reduction on farmers' profits: The Korea-Chile FTA's effects on Korean grape producers," Economics Discussion Papers 2016-10, Kiel Institute for the World Economy (IfW Kiel).
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