Analysis of farmers’ market power in the value chain of Arabica coffee in Lam Dong Province, Vietnam

Nguyen Thi Tuoi (), Nguyen Phu Son and Pham Le Thong
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Nguyen Thi Tuoi: Department of Agriculture and Forestry, Dalat University
Nguyen Phu Son: Department of Economics, Can Tho University, Vietnam
Pham Le Thong: Department of Economics, Can Tho University, Vietnam

HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, 2022, vol. 12, issue 1, 139-147

Abstract: The market that operates effectively will contribute to actors’ profit and welfare in the coffee value chain conversely if the market is affected by imperfect problems. Suppose the value chain lacks market news, short-term storage, information for product and processing, quality check, and market power. In that case, implied chain actors’ profit and welfare will not be reached. A new method can estimate market power by Lerner index through the stochastic cost frontier once the inputs data price is unavailable and the existence or non-existence of constant returns to scale. So this approach is applied to evaluate farmers’ market power in the value chain of Arabica coffee in Lam Dong Province, Vietnam. Primary data were collected through interviews with 200 farmers Da Lat, Lac Duong, Lam Ha, and Don Duong of Lam Dong Province. The estimated results of the market power and Lerner rate are 0.001. This index indicates that the local coffee market is perfect competition. So the coffee growers do not have market power. The RTS index of 0.56 (less than one) illustrates that farmers’ Return To Scale (RTS) is decreased. Therefore, coffee farmers should link together to establish cooperative that increases market power in price negotiation and coffee consumption.

Keywords: arabica coffee farmers; lerner index; market power; value chain (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:bjw:econen:v:12:y:2022:i:1:p:139-147

DOI: 10.46223/HCMCOUJS.econ.en.12.1.1917.2022

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