Estimation of optimal export size of paprika using third-degree price discrimination

This paper aims to estimate the appropriate distribution quantities for the domestic and Japanese export markets to maximize the average selling price of paprika. In order to determine how to optimally distribute Korean paprika production, the Korean－Japanese paprika demand function was estimated. The estimation results for the domestic and Japanese export markets revealed that the price elasticity of demand was estimated at －0.46 for the domestic market and －0.51 for the Japanese export market. Using these estimates, the optimal distribution quantities for the domestic and export markets were calculated for the period from 2013 to 2022. The findings showed that in each year, the actual export quantities fell short of the optimal levels. Additionally, assuming Korean paprika holds a monopolistic position in the Japanese market, implementing price discrimination resulted in a higher optimal export share for domestic paprika compared to the actual share, leading to an increase in domestic paprika prices per kilogram and a decrease in Japanese export prices.