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Transportation Cost and Market Power of Middlemen: A Spatial Analysis of Agricultural Commodity Markets in Developing Countries

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  • Suzuki, Aya
  • Sexton, Richard J.

Abstract

While high transportation cost and market power are long-recognized sources of market inefficiency, their analytical relation has not been established in a developing country context. In this paper, we analyze the mechanism by which lower transportation costs increase farm prices and profits by reducing marketing costs and marketing firms' exercise of oligopsony power. We utilize a two-stage game framework to demonstrate use of an endogenous financing mechanism to generate funds to improve transportation infrastructure and derive the optimal rate of taxation to maximize producer welfare.

Suggested Citation

  • Suzuki, Aya & Sexton, Richard J., 2005. "Transportation Cost and Market Power of Middlemen: A Spatial Analysis of Agricultural Commodity Markets in Developing Countries," 2005 Annual meeting, July 24-27, Providence, RI 19329, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19329
    DOI: 10.22004/ag.econ.19329
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    References listed on IDEAS

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    Cited by:

    1. Christine Moser & Christopher Barrett & Bart Minten, 2009. "Spatial integration at multiple scales: rice markets in Madagascar," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 281-294, May.

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