Delinking of Local and International Prices: Exploring Competition in the Bangladesh Rice Market

We take a broader perspective on the issue of recent price increases in the domestic rice market in Bangladesh. The query that follows is that: what exactly is the nature of competition at different stages of the domestic rice market of Bangladesh? This can be addressed only if we examine the agents, their strategies and incentives at different stages of the rice market value chain. The structure of rice markets in Bangladesh is generally considered to be competitive. But it is entirely possible that market operates quite competitively within one stage, whereas competition is much restricted within another stage. Instead of analyzing competition in the entire market as a single entity, it would be appropriate to analyze competition in each and every stage of the market. Therefore, this study focuses on particular aspects of market competitiveness by explaining incentives and behaviors of different agents in the market, particularly those of large firms operating in the middle of the rice market supply chain. We have examined pricing decisions and bargaining by agents at different stages of the market. We have also studied scope for collusive behavior among large firms in setting prices. In addition, we examined the relationships between the international prices of rice and the domestic wholesale prices.