Analysis of rice price transmission in West Java, Indonesia

This study aims to analyze the short and long-term transmission of rice prices at the farmer and consumer levels in West Java Province. This study uses monthly data on rice prices at the producer (farmer) and consumer levels from 2014–2020 in West Java Province, Indonesia. Meanwhile, the method used in this study is Error Correction Model regression. The results show the existence of market integration and asymmetry in the vertical transmission of rice prices between farmers and consumers, both in the short and long term. The causes of asymmetric price transmission are the presence of uncompetitive behavior or abuse of market power among intermediary traders, especially in concentrated markets, as well as adjustment costs and menu costs. Therefore, the government needs to monitor rice prices regularly to ensure consumer affordability and profitability for farmers. In addition, the government must also have accurate information to identify irregularities or abuse of market power. Furthermore, the government needs to create policies encouraging the involvement of regionally-owned enterprises, the central government, and the private sector in the rice trading sector.