Examining the Market Structure of Vegetable Oil Products in Iran

Document Type : Original Article

Authors

1 Master in Economic System Planning, Shahid Beheshti University, Tehran, Iran.

2 Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University

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

10.48308/jem.2024.235975.1921

Abstract

Vegetable oil is a strategic product based on importing and impacted by international crisis. Understanding its market structure can enhance market policies and better guide both producers and consumers. In this research, the market structure has been determined using non-parametric concentration criteria, translog cost function estimation, and Lerner index. During the period from 2015 to 2022, results show that the Herfindahl-Hirschman Index averaged 0.11, revealing that out of a total of 59 firms in the industry, 54% of market shares belong to the four biggest companies. Lerner index for the three active firms in the Securities Exchange, that has been estimated through two methods of price-cost margin and cost function estimation, was found to be approximately below 0.2. This indicates the firms have limited pricing power. The findings display the market structure as a monopolistic competition structure. It seems that maybe there is no necessity for the government intervention at least in pricing of the ultimate product, while the main challenge remains securing the supply of crude vegetable oil inputs.

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