Abstract
The prices of red chili and red onion commodities tend to fluctuate and have high margin rates, causing inefficiency of prices. On the other hand, the demand for red chili and red onion will increase as the number of population increases. This study aimed to analyze the factors and behaviors that can affect the pricing system on red onion and red chili in East Jakarta by using the Vector Error Correction Model and Game Theory. The results showed that the producer and wholesale prices of red onion and red chili commodities contribute to the price discovery at the consumer level. Maximum profit is achieved by retail merchants when they adopt prices in collusion as a dominant strategy. Keywords: red onion, red chili, game theory, price, VECM
Highlights
The GDP growth rate of the agricultural sector reached 0.58% in the fourth quarter of 2016 and increased in the first quarter of 2017 by 13.59%
The results showed that the producer and wholesale prices of red onion and red chili commodities contribute to the price discovery at the consumer level
The Indonesian Center for Agricultural Socioeconomic and Policy Studies (2015) stated that the average GDP growth rate of the agriculture sector reaching up to 3.56% per year has encouraged the increase in the national GDP
Summary
The GDP growth rate of the agricultural sector reached 0.58% in the fourth quarter of 2016 and increased in the first quarter of 2017 by 13.59% (the Ministry of Agriculture of the Republic of Indonesia, 2017). The Indonesian Center for Agricultural Socioeconomic and Policy Studies (2015) stated that the average GDP growth rate of the agriculture sector reaching up to 3.56% per year has encouraged the increase in the national GDP. This is caused by the use of data bases with constant prices as well as the increased production of horticulture, food, and plantation. The Center for Data and Information System of the Ministry of Agriculture of the Republic of Indonesia (2016) explained that domestic market demand and export opportunity on red onion and red chili commodities tend to increase.
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