Retail Margins, Price Transmission and Price Asymmetry in Urban Food Markets: The Case of Kinshasa (Zaire)

Bart Minten () and Steven Kyle

Journal of African Economies, 2000, vol. 9, issue 1, 1-23

Abstract: Some African food markets can still seem to operate inefficiently after price liberalisation. This seems mainly due to the existence of significant transaction costs because of small-scale operations, and is influenced by lack of grading, deficient infrastructure and information systems. It is shown in the case of retail markets in Kinshasa that search, supervision and other difficult-to-measure transactions costs are more important in the margin of food products than the measurable marketing costs (e.g., storage, transport). It is also shown through time series analysis that most of the price transmission between wholesale and retail happens in the same week and that price asymmetry, i.e., the different transmission of price increases compared with price decreases, is present for most products. Products characterised by relatively more standardisation and homogeneity are shown to have lower retail margins and to behave symmetrically. A model based on kinked demand curves and search costs might explain this asymmetric price behaviour. Copyright 2000 by Oxford University Press.

Date: 2000
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