Firm Behaviour and Interaction in the European Banana Market: 1960–1993

Abstract

Most international commodity markets are typically characterised by some kind of imperfect competition (in prices or in quantity) and by a certain degree of product differentiation. In this paper a group of models are presented for the German banana market, in which different types of firms' strategic behaviour are considered. Models are evaluated using a non-nested econometric test and the resulting model that best fits the data is somewhere between a Cournot and a Stackelberg. This result provides evidence of the explicit nature of the strategy followed by the multinational enterprises that control the market. This has welfare implications that need to be taken account of when considering different trade policies.