Price discrimination and market power in the international fertiliser market: empirical evidence for exports from Russia
Journal Title: Agricultural and Resource Economics: International Scientific E-Journal - Year 2019, Vol 5, Issue 2
Abstract
Purpose. In 2012, Russia became the world’s second-largest exporter increasing its potash exports from 1996 to 2012 more than two times. The top five countries control more than 50 % of the world’s exports, particularly 53.4 % (38.0 mln MT) for nitrogen, 73.4 % (3.5 mln MT) for phosphate and 90.8 % (35.5 mln MT) for potash. The objective of this study is to analyse the market structure and market concentration of the Russian export company in the international fertiliser market, and to develop hypotheses about the oligopolistic market behaviour. The empirical part of this study tests the hypotheses by employing econometric models to provide evidence for market power and price discrimination in the international fertiliser market. Methodology / approach. The empirical analysis in this study relies on the theoretical framework of pricing-to-market (PTM) pioneered by Krugman (1986, 1987). Following Krugman’s groundbreaking approach, Knetter (1989) developed an empirical model testing the PTM hypothesis. The major advantages of the Knetter’s model are that the pricing behaviour of the export country towards the import countries can be estimated with public statistical data for the export statistics of the export country and bilateral exchange rates between the currencies of the export and import countries. Results. This study presents empirical evidence for the behaviour of Russian exporters in the international fertiliser market. The estimation results indicate that market power in the export market for nitrogen fertilisers is exercised by Russian exporters in more than two-thirds of the destination countries and in the export market for potash fertilisers in eight out of nine countries. The exercising market power in the export market for potash fertilisers is much more pronounced than in the nitrogen fertiliser export market. Originality / scientific novelty. Primarily against the background of increased market concentration by the companies in the fertiliser markets and regarding the aforementioned cartel dispute, this study constitutes a first attempt to close the research gap in the empirical literature and to promote empirical research on the market behaviour of export companies in the international markets for nitrogen and potash fertilisers. Practical value / implications. This study uses econometric techniques to examine the collapse of the potash cartel on the use of price discrimination and the exercising of market power in the international fertiliser market by Russia. The descriptive analysis shows that Russia plays an important role in the export of nitrogen and potash on the world market and many importing destinations. Often Russia in addition to the high market share also has no or few competitors in the various destinations, which supports speculation of exercising market power.
Authors and Affiliations
Philipp Goretzki, Oleksandr Perekhozhuk, Thomas Glauben, Jens-Peter Loy
Keywords
Related Articles
- EP ID EP590425
- DOI -
- Views 136
- Downloads 0
Taxation mechanism in the system of state support of agricultural producers
Reforming the tax mechanism in agriculture should include not only the optimal size of the tax burden, but also responsible for the structure of payments and fiscal instruments applicable level of economic development of...
The response of farm labor and farm production to animal grazing and water resource scarcity in Northern Ethiopia
Purpose. Rural households spend a large share of their daily time to search for grazing feed, water resource and collect straw by displacing labor time away from crop farming activities. This paper aims to analyze the ec...
Structure of the poultry meat market in Ukraine
The purpose of this paper is to carry out a marketing research of the state and structure of the poultry meat market in Ukraine; to identify the factors that hold back and stimulate the development of the poultry market...
Innovative development of Ukraine as a basis for formation of bioeconomy
Innovation is an important factor for the economic development. Analysis of innovative development indicators makes it possible to determine the main directions of innovation as the basis of formation of the bioeconomy....
Improved policy making through enhanced dialogue and focused education
The purpose of the paper is to show ways of strengthening civil society’s capacities and contribute to improvement of transparency of implementation of sectoral economic strategies at the level of Lviv Region of Ukraine...