3.2 Managerial economics Image source:
http://economist.com/PrinterFriendly.cfm ?Story_ID=797619 The
coffee industry has been experiencing significant difficulties
in recent times, prices tumbling to all-time lows in real terms
during 2002 (see Figure 1). This has caused considerable
hardship for coffee producers around the world, but at long last
there appears to be good news. After four years of record low
prices, the International Coffee Organisation (ICO) composite
price index shows average prices to be trending upwards. From an
average price of 48 cents a pound in 2002, to 52 cents a pound
in 2003, the first quarter of 2004 saw an average price of
around 59 cents a pound. Image source:
http://www.progreso.org.uk/ However, as a recently published
World Bank discussion paper reveals, market dynamics within the
coffee industry are complex and require careful analysis. An
interesting development is the emergence of a segmented product
market, differentiated according to a variety of characteristics
including