Economics at your fingertips  

Optimal Investment in Transportation Infrastructure When Middlemen Have Market Power: A Developing-Country Analysis

Pierre R. Mérel, Richard J. Sexton and Aya Suzuki

American Journal of Agricultural Economics, 2007, vol. 91, issue 2, 462-476

Abstract: Transportation costs and buyer market power reduce prices and income received by farmers in developing countries. Transportation costs directly affect the marketing margin and also exacerbate market power by limiting farmers’ access to buyers. This article develops a multistage spatial model to determine optimal investment in transportation improvements, taking account of impacts on marketing costs and competition. The beneficial impact of investments from farmers’ perspective is mainly through enhanced competition, meaning significant under-investment may occur if this effect is ignored. However, the optimal investment depends on the relative importance of transportation costs; in some settings, transportation improvements reduce farm prices because buyers rationally over-compensate farmers for these costs. Copyright 2007, Oxford University Press.

Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) (application/pdf)
Access to full text is restricted to subscribers.

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:

Access Statistics for this article

American Journal of Agricultural Economics is currently edited by Madhu Khanna, Brian E. Roe, James Vercammen and JunJie Wu

More articles in American Journal of Agricultural Economics from Agricultural and Applied Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().

Page updated 2023-03-05
Handle: RePEc:oup:ajagec:v:91:y:2007:i:2:p:462-476