Price and trade mechanism for palm and soybean oils: a comparative analysis of economic development between Asia and contemporary world

Abstract

This study investigates the price mechanism of demand function to structure the liberalized tariff system on vegetable oil market and documents the impact on quantity, revenue and welfare gains of the world economy in a monopolistic setting. We shed light on close trading partners between palm and soybean oil markets among the exporting and importing countries and explore the effects by utilizing spatial equilibrium modeling approach to see the major beneficiaries in the price mechanism game. Our assessment provides quantitative measures of the economic effects which helps to weigh the benefits and impacts by comparing liberalized tariff and non-reform system. Findings from this study indicate that price and trade mechanism improve the welfare gains and highlight the importance of moving toward an effective price mechanism and liberated tariff system in the global vegetable oil market. The findings of this analysis resolve the debate on the benefits of a liberated tariff system on vegetable oil markets neglecting beneficiaries' trade barriers dispute.