Judul: Price Discrimination Analysis of Butter in the German Market
Abstrak: Germany is the largest producers of butter among other countries in the EU. The trend of butter production in Germany increase steadily during 2010 – 2013. In 2013, butter production in Germany reach to 491 460 tons and German’s butter production amounted to 25% of the EU butter production. So, Germany has an advantage in butter production compared with other countries in the EU. The advantage in butter production and stock availability of butter strongly supports the development of food industry in Germany. However, there were fluctuations in the average price of butter in Germany during 1999-2010 and it was occurred from year to year. Fluctuation of butter prices can affects business risk, the competition of butter producers, and economic surplus of consumers in the German butter market. One of the strategies which can be done by producers and retailers to survive in the competition is establish right price strategy, such implement price discrimination strategy. Price discrimination strategy aims to get consumer surplus, to increase profits, and to face business competition. The main objective of the study is to analyze butter price discrimination in German market. In detail, objectives of this study are: first, to analyze the necessary conditions (market power, different demand elasticity, and preventing arbitrage) of occurrence in price discrimination of butter products in the German market through structure analysis, second, to analyze demand function of butter products based on types of retail store in Germany, third, to analyze price discrimination of butter products based on regions in Germany, and fourth, to analyze price difference of butter products across types of retail store in Germany. The result shows that the three necessary conditions (market power, different demand elasticity, and preventing arbitrage) for the occurrence of butter price discrimination in the German retail market are fulfilled. The butter industry in Germany has an HHI value of 1 635 and the four-firm concentration ratio (CR4) index reached 71%, which indicates that the German butter industry has either a moderate level of market concentration and an oligopoly market structure with some dominant firms. The oligopoly butter market structure in Germany is dominated by four producers of butter, are: Irish Dairy Board, Campina, Sachsenmilch, and Arla Foods. Market power in an oligopoly is also greatly influenced by some main producers who also produce private label products. We can conclude that the three demand curves (hypermarket, supermarket and discounter) have a negative slope or downward shape (progressive decrease from the upper left to the lower right). This condition is in accordance with the theory of demand that price and quantity have the opposite relationship. The slope of the demand function in the hypermarket is -3.701, -2.883 in the supermarket, and -5.517 in the discounter (largest value of discounter indicates that it is the most elastic of the retail stores). We also can conclude that on the demand side, butter consumption is not discriminating along the demand curve (price and quantity) across regions in Germany. On the supply side, producers and retailers are not discriminating in regards to butter prices across regions in Germany. The mean
Keyword: price discrimination, butter, semi and double logarithm model, the German market