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Optimal Pricing of Primary Commodities in Developing Countries: A Model from Sub-Saharan Africa

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  • Ehui, M.K.
  • Ehui, Simeon K.

Abstract

In most developing countries, especially in sub-Saharan Africa, prices received by fanners are not optimal in the sense that they do not optimize government revenues. In this paper a dynamic model for optimal pricing of primary commodities is developed. The model and results demonstrate that optimal prices depend on marginal cost of the commodity stock, the exporting country's supply elasticity, the importing country's demand elasticity, the social rate of time discount. Therefore when the model is cast in a static framework, or the foreign elasticity of demand is not accounted for, the result could be biased.

Suggested Citation

  • Ehui, M.K. & Ehui, Simeon K., 1997. "Optimal Pricing of Primary Commodities in Developing Countries: A Model from Sub-Saharan Africa," 1997 Occasional Paper Series No. 7 198054, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaaeo7:198054
    DOI: 10.22004/ag.econ.198054
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    References listed on IDEAS

    as
    1. Ernst Lutz & Pasquale L. Scandizzo, 1980. "Price distortions in developing countries: A bias against agriculture," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 7(1), pages 5-27.
    2. Malcolm D. Bale & Ernst Lutz, 1981. "Price Distortions in Agriculture and Their Effects: An International Comparison," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(1), pages 8-22.
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