Buyer and Seller Concentration in Global Commodity Markets

Document Type

Article

Journal/Book Title/Conference

Review of Development Economics

Volume

16

Issue

2

Publication Date

4-16-2012

First Page

359

Last Page

367

Abstract

In recent years there has been an increased incidence of export restrictions applied by developing countries to commodities and raw materials. Commodity markets may be characterized by concentration on the buyer side, with a small number of transnational intermediary firms purchasing from supplying countries and distributing to the market, and recent work has suggested that export taxes may be an optimal policy to recapture monopsony rent. However, in many commodity markets there are also a limited number of large supplying countries. This paper considers a situation where an oligopsonistic intermediary industry purchases from a small number of supplying countries, the governments of which act strategically in their policy choices both with respect to the intermediaries and any competing suppliers. In the resulting two-stage game, the paper shows that an export subsidy, rather than an export tax, may arise as the optimal intervention.

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