When quality does not pay: trader market power, pricing outcomes and smallholder profitability in the Lao mountain goat chain

Purpose This study investigates how trader market power can contribute to buyer-induced price discrimination and potentially affect smallholder profitability in the mountain goat value chain of Laos and Vietnam. Design/methodology/approach Cross-sectional survey data were analysed from 152 smallholder farmers in Laos and traders, abattoirs, restaurant owners and consumers in Laos and Vietnam. Econometric models were applied to examine how smallholder characteristics, farm characteristics and market orientation influence farmgate prices and profits under informal selling arrangements. Findings Education, proximity to markets and herd size significantly increase farmgate prices and profits. However, smallholders oriented toward producing higher-quality, mature goats, tend to earn lower profits, revealing the fact that price premiums fail to cover additional costs of quality-focused production. The findings provide evidence of systematic pricing differentials consistent with buyer-induced price discrimination under trader market power that might undermine incentives and restrict income growth. Research limitations/implications This analysis is based on cross-sectional survey data from two countries. Future work could extend this analysis using more variables and assess other chains. Originality/value To our knowledge, this is one of the first studies to examine systematic pricing differentials and their association with smallholder profitability in the Lao mountain goat value chain. By documenting these pricing patterns and their implications for market incentives, the study provides an empirical basis for future research on trader behaviour and pricing mechanisms in informal livestock markets.