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.