TY - JOUR
T1 - Marketing natural products and the development of synthetic substitutes
T2 - A Kenyan example
AU - Winter-Nelson, Alex E
PY - 1996/10
Y1 - 1996/10
N2 - Adverse changes in terms of trade are generally viewed as an external cause of economic decline in Africa. However, in some instances export price shocks are not exogenous to domestic policy. When the entry of synthetic substitute producers is a function of the price of the natural product, raw material export levels can induce entry and cause shifts in demand. This paper examines the market for Kenyan pyrethrum (a natural insecticide) and develops a dynamic programming model for determining export strategy when the current export price induces structural changes in demand. Analysis of the pyrethrum market over the 1963-90 period suggests that the use of this analytical method could have mitigated the loss of market share to synthetics after 1980. The policy prescribed by the dynamic model would increase the exporter's net revenues by almost 30% compared with the policy indicated by analysis that treats demand as exogenous. In fact, the value of Kenyan pyrethrum exports from 1981-86 averaged 36% below the 1976-80 value.
AB - Adverse changes in terms of trade are generally viewed as an external cause of economic decline in Africa. However, in some instances export price shocks are not exogenous to domestic policy. When the entry of synthetic substitute producers is a function of the price of the natural product, raw material export levels can induce entry and cause shifts in demand. This paper examines the market for Kenyan pyrethrum (a natural insecticide) and develops a dynamic programming model for determining export strategy when the current export price induces structural changes in demand. Analysis of the pyrethrum market over the 1963-90 period suggests that the use of this analytical method could have mitigated the loss of market share to synthetics after 1980. The policy prescribed by the dynamic model would increase the exporter's net revenues by almost 30% compared with the policy indicated by analysis that treats demand as exogenous. In fact, the value of Kenyan pyrethrum exports from 1981-86 averaged 36% below the 1976-80 value.
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U2 - 10.1093/oxfordjournals.jae.a020915
DO - 10.1093/oxfordjournals.jae.a020915
M3 - Article
AN - SCOPUS:0030422674
SN - 0963-8024
VL - 5
SP - 469
EP - 496
JO - Journal of African Economies
JF - Journal of African Economies
IS - 3
ER -