Market Power in International Commodity Trade: The Case of Coffee

24 Pages Posted: 16 Jun 2015

See all articles by Mitsuru Igami

Mitsuru Igami

Yale University - Department of Economics ; Yale University - Cowles Foundation

Multiple version iconThere are 2 versions of this paper

Date Written: June 2015

Abstract

This paper studies the impact of market power on international commodity prices. I use a standard oligopoly model and exploit historical variations in the structure of the international coffee bean market to assess the impact of a cartel treaty on coffee prices and its global welfare consequences. The results suggest that the International Coffee Agreement (ICA, 1965–89) raised its price by 75% above the Cournot‐competitive level, annually transferring approximately $12 billion from consumers to exporting countries, and its lapse in 1989 explains four‐fifths of the subsequent price decline, that is, the ‘coffee crisis.’

Suggested Citation

Igami, Mitsuru, Market Power in International Commodity Trade: The Case of Coffee (June 2015). The Journal of Industrial Economics, Vol. 63, Issue 2, pp. 225-248, 2015. Available at SSRN: https://ssrn.com/abstract=2618908 or http://dx.doi.org/10.1111/joie.12076

Mitsuru Igami (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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