Volume 10 Issue 1 ( March 2023 )


A Game Theory Model of Salt Price Stabilization Using Warehouse Receipt System

Muhammad Reza Kusuma Wardana, Wahyudi Sutopo, Yuniaristanto, Muhammad Hisjam

In Indonesia, salt produced by farmers contributes 87.9% to the total national salt production. Unfortunately, the lack of quality of salt produced by traditional farmers is due to the problems of uncertain weather, salt processing technology; and lack of business insight makes it difficult for farmers’ salt to compete with imported salt. This causes price volatility problems latility and fluctuating supply in the distribution system of salt in Indonesia. This study discusses the real problem of salt distribution with a case study in the largest salt-producing district in Central Java, namely the Pati Regency. The mathematical model uses a game theory approach that considers the warehouse receipt system (WRS) as a collateral management system of price support and price stabilization. The model involves two entities, including the farmers as commodity owners and the warehouse, who offer a collateral system with warehouse receipts. The game theory was used to analyze interactions between farmers and the warehouses in applying of the WRS. The farmers and warehouse strategies were developed based on the monopolistic and controlled wholesaler WRS schemes. The result shows that the proposed model can be applied to solve the distribution problem and can give a more promising outcome than its counterpart. Based on numerical examples, it can be concluded that monopolistic distribution of WRS scheme gives more benefits with a bigger payoff for both farmer and warehouse compared with a controlled wholesaler.

Keywords: farmers’ salt; supply disparity; price fluctuation; warehouse receipt system (WRS);