Estimating oligopsonistic market power in Uganda’s rice industry

ABSTRACT

The study applies the conjectural variations approach to determine whether Ugandan rice traders exercise oligopsony power in the market for domestic rice. The trader margin for milled rice is found to be 10.20% on average. Using an econometric system of four equations, the null hypothesis of competitive behaviour holds at different price elasticities of farm supply, ranging from inelastic to elastic supply. This implies that there is no evidence that rice traders apply oligopsony power when procuring milled rice from farmers. However, since the study does not examine the existence of trader bargaining power, we cannot completely rule out the existence of market power at this node of the value chain. Therefore, future studies should examine trader bargaining power to be able to ultimately determine if there is need to intervene at this segment of rice value chains to ensure competitive behaviour.

KEYWORDS:

• Oligopsony power
• conjectural variations
• Uganda rice industry

JEL CODES:

• D43
• L13
• Q13

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data that support the findings of this study are available from the corresponding author upon request.

Ethics declaration

The research was undertaken collaboratively by Uganda’s National Agricultural Research Organization (NARO), a semi-autonomous organisation responsible for all agricultural research in Uganda, and the Africa Rice Center, a member of the CGIAR Consortium. Ethics approval for research conducted in Uganda may be provided by the Uganda National Council for Science and Technology (UNCST). UNSCT recommends that in the case of international collaborative research, ethics approval should be provided by the local Research Ethics Committee because of its better understanding of the cultural sensitivities of the population and because it is better placed to monitor compliance. However, this study did not fall under the category of studies for which NARO was to seek ethics approval because it did not include any of the following:

1. Research requiring access to animals, plants, or any natural resources of the country

2. Health research involving human subjects

3. Experiments involving or leading to genetically modified organisms

4. Data collection from communities living in protected areas

A letter was provided by NARO to each enumerator to present to the respondents. It introduced the purpose of the survey and informed the participant of the voluntary nature of their participation in the survey. Therefore, before interviewing respondents, informed consent from the respondents was obtained and respondents who accepted to be interviewed were informed that they were free to withdraw from the interview at any time if they so wished. Also, respondents were assured that their information would remain confidential. The data will be made available in accordance with the CGIAR Open Access and Data Management Policy.

Notes

1 Since our model treats milled rice purchased from farmers as a quasi-fixed input, we find the associated quasi-fixed cost to be large enough to merit separate treatment and is therefore not subsumed in total variable cost.

Additional information

Funding

This work was supported by the CGIAR Research Programme on Rice Agri-food Systems.