Preprint Article Version 1 This version is not peer-reviewed

Indonesian Traditional Market Flexibility amidst State Promoted Market Competition

Version 1 : Received: 18 October 2018 / Approved: 18 October 2018 / Online: 18 October 2018 (11:28:00 CEST)

How to cite: Purnomo, M.; Otten, F.; Faust, H. Indonesian Traditional Market Flexibility amidst State Promoted Market Competition. Preprints 2018, 2018100418 (doi: 10.20944/preprints201810.0418.v1). Purnomo, M.; Otten, F.; Faust, H. Indonesian Traditional Market Flexibility amidst State Promoted Market Competition. Preprints 2018, 2018100418 (doi: 10.20944/preprints201810.0418.v1).

Abstract

The penetration of modern supermarkets is believed to be the cause of the declining role of traditional markets and street vendors in Indonesia. But the competition between state-promoted markets and traditional markets is rarely discussed. This investigation focuses on traditional markets as social institutions, which continuously have developed a variety of strategies in order to remain competitive in the midst of intense rivalry. Firstly, we will outline a theoretical understanding of the traditional markets positioning along the concepts of flexibility and market devices. Secondly, we empirically reflect the strategies of four traditional vegetable markets in the District of Malang, East Java Province, as case studies. We show that the traditional markets build flexibility without governmental support by: (1) specifying commodities, (2) segmenting customers, (3) managing the load time, (4) modifying transportation to operate more efficiently, and (5) minimizing transaction costs by leveraging social capital. We argue that traditional vegetable markets institutionally reduce the potential of transaction costs to be competitive and avoid problems of coordination by building social capital through networks. All in all, market institutions supported by market devices are flexibly capable of adapting to the pressures of both selfishness among actors and competition with other markets.

Subject Areas

traditional market; state promoted market; coordination problems; market devise; market flexibility; adaptation

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