Competition in the gum arabic market: a game theoretic modelling approach

Afaf H. Rahim, Ekko van Ierland and Hans-Peter Weikard

Quarterly Journal of International Agriculture, 2010, vol. 49, issue 01, 24

Abstract: Gum arabic is mainly produced from two Acacias that are found in the gum belt of Sub-Saharan Africa. These are Acacia senegal that produces high quality gum and Acacia seyal that produces low quality gum. In recent years the gum market structure has changed and Sudan lost its near monopoly position as Chad and Nigeria became important gum suppliers. In order to understand the competition between Sudan, Chad and Nigeria in the export of high and low quality gum arabic we develop a von Stackelberg model with interdependent markets. Whereas Sudan (the leader) has an absolute cost advantage in the export of high quality gum, Chad and Nigeria (the followers) have a cost advantage in the export of low quality gum. We determine the market equilibrium outcomes and study the impact of development assistance scenarios to promote either the high or low quality gum. Our results suggest that the leader is better off promoting the quality for which it has cost advantage, i.e. the high quality gum. This also leads to a lower reduction in the competitors’ profit than promoting low quality gum. Similarly, when followers promote the quality for which they have cost advantage, i.e. the low quality gum, this results in a lower reduction in the leader's profit than when they promote high quality gum. The best strategy of the followers is, however, sensitive with respect to the elasticities of demand.

Keywords: Demand and Price Analysis; International Relations/Trade; Land Economics/Use; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://ageconsearch.umn.edu/record/155540/files/1_Rahim.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:qjiage:155540

DOI: 10.22004/ag.econ.155540

Access Statistics for this article

More articles in Quarterly Journal of International Agriculture from Humboldt-Universitaat zu Berlin Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().