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The Assessment Of Competition, Markup, And Price Determination In The Indonesian Food And Beverage Industry

Author

Listed:
  • Masagus M. Ridhwan

    (Bank Indonesia)

  • Dionisius A. Narjoko

    (Economic Research Institute for ASEAN and East Asia (ERIA))

  • Krisna Gupta

    (Politeknik APP Jakarta)

Abstract

This study uses Indonesia as a case study to address this issue of product market competition and price determination in the food and beverage industry. It utilizes the plant-level data of the food and beverage industry over the period 2017-2021 and estimates the markup using the recent method notably De Loecker-Warzynksi (2012). The study found a declining and stable pattern of industrial concentration over a long-term period from 2000 to 2021, which indicates a more or less moderate competition between firms in product markets of the industry in general. The econometric exercise found a positive relationship between industrial (or market) concentration and either price cost margin or markup, suggesting the potential influence of market power on the extent of profitability in the industry. This study however found no evidence of the relationship between the two variables and price. The findings of this study suggest that policy towards the food and beverage industry should focus on monitoring the extent and dynamics of product market competition as it found some degree of the exercise of market power.

Suggested Citation

  • Masagus M. Ridhwan & Dionisius A. Narjoko & Krisna Gupta, 2023. "The Assessment Of Competition, Markup, And Price Determination In The Indonesian Food And Beverage Industry," Working Papers WP/03/2023, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp032023
    as

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    File URL: http://publication-bi.org/repec/idn/wpaper/WP032023.pdf
    File Function: First version, 2023
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    References listed on IDEAS

    as
    1. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    2. Krisna Gupta, 2023. "The Heterogeneous Impact of Tariffs and Ntms on Total Factor Productivity for Indonesian Firms," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 59(2), pages 269-300, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Product market competition; industrial concentration; mark-up; price; food and beverage industry;
    All these keywords.

    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
    • B11 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Preclassical (Ancient, Medieval, Mercantilist, Physiocratic)
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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