THE ASSESSMENT OF COMPETITION, MARKUP, AND PRICE DETERMINATION IN THE INDONESIAN FOOD AND BEVERAGE INDUSTRY

Masagus M Ridhwan, Dionisius Narjoko and Krisna Gupta ()

No WP/03/2023, Working Papers from Bank Indonesia

Abstract: This study uses Indonesia as a case study to address this issue of product market competition and price determination in the food and beverage industry. It utilizes the plant-level data of the food and beverage industry over the period 2017-2021 and estimates the markup using the recent method notably De Loecker-Warzynksi (2012). The study found a declining and stable pattern of industrial concentration over a long-term period from 2000 to 2021, which indicates a more or less moderate competition between firms in product markets of the industry in general. The econometric exercise found a positive relationship between industrial (or market) concentration and either price cost margin or markup, suggesting the potential influence of market power on the extent of profitability in the industry. This study however found no evidence of the relationship between the two variables and price. The findings of this study suggest that policy towards the food and beverage industry should focus on monitoring the extent and dynamics of product market competition as it found some degree of the exercise of market power.

Keywords: Product market competition; industrial concentration; mark-up; price; food and beverage industry (search for similar items in EconPapers)
JEL-codes: A11 B11 C11 D11 F11 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2023
New Economics Papers: this item is included in nep-agr, nep-com and nep-sea
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