Welfare effects of increasing competition in the market of export products (Case study: saffron product)

Saffron is one of the non -export products that belong to Iran more than half of it global market. In the last two decades, the export price of saffron has been declining. Continuing this process by reducing exports can have important welfare consequences for producers, exporters and consumers. In this regard, the present study aimed to evaluate the welfare effects of saffron export prices in the world market on the aforementioned groups. The analytical tools used include domestic supply and demand functions and export supply, which was estimated by the series data during the period of 1980-2020. The findings of the study indicate a significant effect of reducing export prices on saffron exports. It has been found that the price of exporting producers and exporters is suffering from welfare, but the welfare of domestic consumer's increases, which is far less than the welfare of the two groups. Welfare analysis showed that in the saffron market if the monopoly in the market of these products completely disappeared, the total welfare of the said groups would be reduced by about 53 percent. It is suggested that before the producers are harmed, support programs should be prepared for this group specifically so that in case of changes in the world market, with the support of the product, it will be possible to continue production. Until now, the export price has always been much higher than the domestic price and exporters have been able to make a profit, so to support producers, transferring income from exporters in the form of a production protection fund can be a political solution. This fund can also be used as a tool to reduce the volatility of exporters' income.