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Compact case
Case
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Reference no. HKS1274.0
Published by: Harvard Kennedy School
Published in: 1995

Abstract

Much of Indonesia''s clove crop is used to flavor Krepek cigarettes, which are extremely popular in the country. Clove farmers are poor, however, and a group of Indonesian businessmen proposed that the government require that Krepek cigarettes manufacturers buy all their cloves from a marketing company that the businessmen would form. As the exclusive supplier of cloves to the Krepek cigarettes manufacturers, the marketing company could charge a higher price for the cloves and pay a higher price to clove farmers. This case can be used to discuss supply and demand curves, the problems of keeping markets from equilibrium, and the incidence of a price increase.

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Abstract

Much of Indonesia''s clove crop is used to flavor Krepek cigarettes, which are extremely popular in the country. Clove farmers are poor, however, and a group of Indonesian businessmen proposed that the government require that Krepek cigarettes manufacturers buy all their cloves from a marketing company that the businessmen would form. As the exclusive supplier of cloves to the Krepek cigarettes manufacturers, the marketing company could charge a higher price for the cloves and pay a higher price to clove farmers. This case can be used to discuss supply and demand curves, the problems of keeping markets from equilibrium, and the incidence of a price increase.

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