Pricing Policy Under Double Market Power: Madagascar and the International Vanilla Market

Jaime de Melo, Marcelo Olarreaga and Wendy Takacs

No 1447, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper uses a price-leadership model of the international vanilla market to study the welfare consequences of alternative pricing policies for Madagascar – a country that controls domestic production through a single-channel marketing system and is the leader in the vanilla market. Econometric estimates of the model are used for simulations of welfare and revenue gains and losses and internal redistribution of income from alternative pricing policies. The results indicate that Madagascar could have gained between 0.9–2.6% of GDP per year on average over the period 1981–91 by following optimal pricing policies, and that producers were overtaxed suggesting that political economy considerations played a role in the pricing decisions.

Keywords: Income Distribution; Marketing Boards; Monopoly Power; Monopsony Power; Optimal Pricing (search for similar items in EconPapers)
JEL-codes: D33 D43 F14 Q17 (search for similar items in EconPapers)
Date: 1996-08
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Pricing Policy Under Double Market Power: Madagascar and the International Vanilla Market (2000)
Working Paper: Pricing policy under Double Market Power: Madagascar and the International Vanilla Market (1996)
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