Dynamics of demand sensitivity for various rice qualities faced by retailers

Abstract

The pricing behaviour of rice at the retail level needs to receive adequate attention. Rice retailers in retail markets are often assumed to act as price takers, implying that individual rice retailers face a horizontal market demand curve. This study aims to comprehend the demand sensitivity of rice retailers in retail markets before, during, and after the COVID-19 pandemic. This study categorises rice retailers as those operating in traditional or modern markets. Previous studies have not illustrated the changes in demand elasticity that occur over time, as captured in this study. This study utilised rice price data published by the Bank of Indonesia. The research model is based on the theory of optimum pricing at the retail level. Based on this theory, the data were descriptively analysed to identify the patterns of demand sensitivity faced by retailers. The results indicate that the demand sensitivity of rice retailers in traditional markets is higher than that in modern markets. As the quality of the rice sold increases, the demand sensitivity of rice for retailers decreases. The findings of this study are valuable for public policies aimed at controlling rice prices at the retail level in Indonesia.