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Does the US have Market Power in Importing Ethanol from Brazil?

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  • Dhoubhadel, Sunil
  • Azzam, Azzeddine M.
  • Stockton, Matthew

Abstract

Increasing requirements in the US to blend higher volumes of advanced biofuels with gasoline has increased the importance of imports of sugarcane-based ethanol from Brazil. Using the residual supply approach we test for oligopsony power of US importers in importing ethanol from Brazil. The residual supply elasticity is found to be highly elastic and positive indicating a small degree of market power. The result implies that the US importers are operating as oligopsony with respect to ethanol imports from Brazil and further restricting ethanol imports would reduce welfare of US importers.

Suggested Citation

  • Dhoubhadel, Sunil & Azzam, Azzeddine M. & Stockton, Matthew, 2014. "Does the US have Market Power in Importing Ethanol from Brazil?," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169543, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea14:169543
    DOI: 10.22004/ag.econ.169543
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    1. de Gorter Harry & Just David R, 2008. "The Economics of the U.S. Ethanol Import Tariff with a Blend Mandate and Tax Credit," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(2), pages 1-23, December.
    2. Asche, Frank & Nøstbakken, Linda & Tveterås, Sigbjørn, 2009. "When will trade restrictions affect producer behavior: Oligopsony power in international trade," UiS Working Papers in Economics and Finance 2009/20, University of Stavanger.
    3. de Gorter, Harry & Just, David R. & Tan, Qinwen, 2009. "The Socially Optimal Import Tariff and Tax Credit for Ethanol with Farm Subsidies," Agricultural and Resource Economics Review, Cambridge University Press, vol. 38(1), pages 65-77, April.
    4. Devadoss, Stephen & Kuffel, Martin, 2010. "Is the U.S. Import Tariff on Brazilian Ethanol Justifiable?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(3), pages 1-13, December.
    5. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 283-300.
    6. Yano, Yuki & Blandford, David & Surry, Yves R., 2010. "The Implications of Alternative U.S. Domestic and Trade Policies for Biofuels," 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland 91832, Agricultural Economics Society.
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    Keywords

    Industrial Organization; International Relations/Trade; Livestock Production/Industries;
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