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Price Policy Under Imperfectly Competitive Market of Soybean Industry in Thailand
Dissertation Abstract:
The study formulated price policy recommendations for Thailand's soybean industry. The price determination model under imperfectly competitive market was developed before model parameters were estimated. The constructed model was used to analyze the effects of existing and potential price policy scenarios.
The study adopted the multi-market equilibrium analysis. The price determination model consisted of four structural equations, one of which was the Appelbaum-Schroeter condition, which was a profit-maximization condition. The other three equations were the general market equilibrium conditions in the soybean oil, meat, and grain markets.
Mixed estimation technique was used to support the nonlinear three-stage least squares method (N3SLS) for parameter estimation. Except for the constant terms, the estimated parameters were highly significant. The simulation analysis showed the model's considerably high predictive ability.
The total ban on importation, surcharge on imported soybean meal, and import tariff under the General Agreement on Tariffs and Trade (GATT) were analyzed using different scenarios. The total ban on importation of all soybean products was found to be beneficial to soybean growers and soybean oil consumers at the expense, however, of livestock raisers and meat consumers. The removal of industry market power under this scenario benefited soybean oil consumers, animal feed producers, and soybean growers.
Removing restrictions on soybean meal importation created a negative impact on soybean growers and soybean oil consumers. However, the import surcharge on soybean meal could effectively reduce such impact and, under appropriate design, it would be beneficial to the industry.
The expansion of domestic soybean grain production, the limitation of soybean meal importation, and the 25 percent reduction of industry market power would support the growth of the industry. A free trade system for soybean oil and imposition of levy on soybean meal and grain may be considered.
The key features of the suggested policy for soybean industry included some regulations on soybean meal and grain importation and their domestic prices. Such regulations must, however, comply with the country's GATT commitments. The model could provide the required quantity and price infonnation. Moreover, tariff rates of 0 and 20 percent on the in-quota import of soybean meal and grain, respectively, may be considered.