Traders' market power along Indonesian rubber value chains

Abstract

Purpose: While traders of agricultural products are known to often exercise market power, this power has rarely been quantified for developing countries. The paper aims to discuss this issue. Design/methodology/approach: In order to derive a measure, the authors estimate the traders' revenue functions and calculate the marginal value products directly from them. The authors subsequently find the determinants affecting their individual market power. Findings: Results show that market power at the traders' level exists and is substantial. This market power is amplified in situations of extreme remoteness, and weakens with increasing market size. Originality/value: An exceptional data set with detailed information on the business practices of rubber traders in Jambi, Indonesia is employed with an innovative methodology to directly estimate revenue functions.