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Abstract

This study explores whether Kazakh and Russian wheat exporters use their privileges of being important players in the South Caucasus countries to exercise market power. We use a three-stage least squares (3SLS) estimation for systems of simultaneous equations and Zellner’s seemingly unrelated regression (SUR) thmethods for our residual demand elasticity (RDE) analysis. The results show that Kazakh exporters are able to exercise market power only in the Georgian wheat market, while Russian exporters are able to do so in both the Armenian and Georgian markets. Neither country is able to exercise market power in the Azerbaijani wheat market. Further, Kazakh and Russian wheat exporters constrain each other’s market powers in Azerbaijan and Georgia. Similarly, Ukrainian exporters are able to intervene to Kazakh and Russian exporters’ market powers in the Azerbaijani and Georgian wheat markets, but not in the Armenian market.

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