Traders are often blamed for high prices, prompting government regulation. We study the effects of a government ban of a layer of financing intermediaries in edible oil supply chain in Bangladesh during 2011–2012. Contrary to the predictions of a standard model of an oligopolistic supply chain, the ban caused downstream wholesale and retail prices to rise, and pass-through of the changes in imported crude oil price to fall. These results can be explained by an extension of the standard model to incorporate trade credit frictions, where intermediaries expand credit access of downstream traders.
Emran, M. Shahe, Dilip Mookherjee, Forhad Shilpi, and M. Helal Uddin.
"Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh."
American Economic Journal: Applied Economics,
Oligopoly and Other Imperfect Markets
Transactional Relationships; Contracts and Reputation; Networks
Food; Beverages; Cosmetics; Tobacco; Wine and Spirits
Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Agriculture: Aggregate Supply and Demand Analysis; Prices
Agricultural Markets and Marketing; Cooperatives; Agribusiness
Agriculture in International Trade