Examining the Market Structure of Vegetable Oil Products in Iran

Document Type : Original Article

Authors

1 Assistant Professor of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran

2 MA in Economic System Planning, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran

3 Professor of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran

10.48308/jem.2024.235975.1921

Abstract

Vegetable oil is a strategic product that relies heavily on imports and is significantly affected by international crises. Understanding its market structure can help improve market policies and provide better guidance for both producers and consumers. In this research, the market structure was analyzed using non-parametric concentration criteria, translog cost function estimation, and the Lerner index. During the period from 2015 to 2022, the results show that the Herfindahl-Hirschman Index (HHI) averaged 0.11, indicating a moderately competitive market. Out of a total of 59 firms in the industry, 54% of the market share is controlled by the four largest companies. The Lerner index for the three active firms listed on the Securities Exchange, estimated through two methods, price-cost margin and cost function estimation, was found to be approximately below 0.2. This suggests that these firms have limited pricing power. The findings indicate that the market structure aligns with monopolistic competition. It seems that government intervention in pricing the final product may not be necessary. Instead, the primary challenge remains ensuring the stable supply of crude vegetable oil inputs.

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