Market power and subsidies in the Indonesian palm oil industry

Diana Chalil

No 6022, 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia from Australian Agricultural and Resource Economics Society

Abstract: Cooking oil is known as an essential commodity in Indonesia. Having such an important role, the Indonesian government often interfered the cooking oil market to assure its price remain low. To do so, the government uses a subsidy policy as one of its instruments. A dynamic duopoly model is applied to evaluate the impact of subsidies given the structure of the industry. Estimation results suggest an evidence of both an increase in the consumer surplus but a decrease in aggregate welfare due to market power. A possible reason is proposed, but, in order to obtain a clear explanation, further research is required.

Keywords: Agricultural Finance; Crop Production/Industries; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 23
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aare08:6022

DOI: 10.22004/ag.econ.6022

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