Moving Rubber to a Better Place - and Extracting Rents from Credit Constrained Farmers along the Way

While traders of agricultural products are known to often exercise market power, this power has rarely been quantified for developing countries. In order to derive a measure, we estimate the trad- ers’ revenue functions and calculate the Marginal Value Products directly from them. We subsequently find determinants affecting their individual market power. An exceptional data set with detailed infor- mation on the business practices of rubber traders in Jambi, Indonesia is employed. Results show that market power at the traders’ level exists and is substantial. This market power is amplified in situa- tions of extreme remoteness, and weakens with increasing market size.