Analysis of supply response of black tiger shrimp production using Nerlove model

, 
Kien Giang (kiengiang), Soc Trang (soctrang) and Ca Mau (camau), which the largest area in Ca Mau, Bac Lieu, and Kien 
Giang, accounting for over 86% of the area of black tiger shrimp farming in the whole Mekong Delta. 
Fig. 1. Area and price of black tiger shrimp through time 
Source: General-Statistics-Office and MARD, 2017 
The area of black tiger shrimp farming is largest in the first quarter of the year when the price of black tiger shrimp reaches the 
highest point. In the second quarter, the farming area and price of shrimp tend to decrease and bottom in the third quarter and 
then rise again in the fourth quarter and peak in the first quarter of the next year. This shows that, in the provinces surveyed, 
farmers decided on the area of black tiger shrimp farming based on the adjustment of selling price in the year. According to 
economic theory, the farmers’ decision to adjust the farming area is not effective due to the delay of 4-5 months between the 
time of stocking and harvesting black tiger shrimp. The reason is that black tiger shrimp are mainly cultured under the improved 
extensive model, combined with rice, forest, and other aquatic species, accounting for over 64% of the whole area of brackish 
Ngoc Le and Quang-Thanh Ngo /Accounting 6 (2020) 429
shrimp farming in the region. This model of production depends largely on nature and the distribution is not uniform between 
the quarters of the year. To better understand this adjustment, the author continues to analyze the relationship between the price 
and output during this period. 
3.2. Descriptive statistics and stationarily test of the panel data 
Table 1 presents the descriptive statistics of the price variables of black tiger shrimp. The standard deviation of the variables is 
relatively small, indicating minor price fluctuations between periods. The price series in the survey period is stationary at the 
original series with a 5% statistical significance level (Im, Pesaran, & Shin, 2003). Therefore, price data series satisfy the 
conditions for quantitative analysis by FE and RE estimates (Table 2). 
Table 1 
Descriptive statistics of log-transformed variables in the supply function 
Variable Obs Average Max Min Standard deviation 
itAln 64 8.74 12.47 4.93 1.93 
itAmln 64 6.87 9.89 0.00 1.61 
itPln 64 11.8 9 12.50 11.39 0.25 
itPmln 64 11.25 11.85 10.87 0.20 
itPstln 64 10.60 11.28 10.06 0.28 
itPcln 64 11.62 12.19 1066 0.36 
Source: Summarized of test results Note: **, *** corresponds to statistical significance of 5% and 1% respectively 
Tables 2 
Test of the unit root of black tiger shrimp price panel data 
Variables Variables name Static P -Value 
itAln Black tiger shrimp farming area - 5.066 *** 0.000 
itAmln Whiteleg shrimp farming area - 6.647 *** 0.000 
itPln Farm-gate price of black tiger shrimp - 3.303 *** 0.000 
itPmln Farm-gate price of white leg shrimp - 5.385 *** 0.000 
itPstln Farm-gate price of black tiger shrimp seed -2.570 *** 0.005 
itPcln Farm-gate price of mud crabs -1.902 ** 0.029 
Source: Summarized from the test results of the survey panel data 
Notes: **, *** corresponds to statistical significance of 5% and 1% respectively. 
3.3. Estimation of supply response model of black tiger shrimp 
The estimation results of the Nerlove supply response function of black tiger shrimp in the Mekong Delta, which is adjusted based on 
the output using FE and RE, are presented in Table 3. The level of significance of the Hausman test with P_value <0.05 implies that 
the FE is appropriate and the model has no serial correlation. However, the Nerlove supply response function by output is violated in 
terms of the assumption of heteroscedasticity so the author adjusted by the model with robust standard error. This means that the 
estimation results by FE are reliable. Short-run estimation of the supply response model shows that the late price of the previous 
season affects the decision to adjust the farming area positively and strongly (Askari & Cummings, 1977). This is the evidence 
that the black tiger shrimp farming area in the provinces surveyed is very sensitive to the impact of the farm-gate price of the 
products in the season. This implies that farmers quickly update the information when establishing expected prices in the process 
of adjusting the supply of black tiger shrimp by expanding the shrimp farming area to increase the output of black tiger shrimp 
both in the short-run and long-run. Therefore, it is necessary to have policies to improve the capacity and market access of the 
farmers based on each group of producers. 
3.4. Coefficient of supply elasticity in farming area 
The coefficients of supply elasticity by output with farm-gate price of the product, farm-gate prices of input elements, and farm-
gate prices of competitive products are elastic (Table 4). Low productivity and the application of science and technology in 
black tiger shrimp farming are the causes of the insignificant adjustment of black tiger shrimp supply when facing the impact 
of its own farm-gate price, input element farm-gate prices and competitive product farm-gate price in short-run. Therefore, it is 
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necessary to have breakthrough policies on technical, scientific, and technological solutions in the improved extensive black tiger 
shrimp farming area. 
Table 3 
The estimation results of Nerlovian production area response 
Variable name Variables FE RE 
ln (black tiger shrimp farming area in the quarter t-1) 
1ln itA -0,32** (-2,38) 
-0,19 
(-1,36) 
ln (black tiger shrimp farming area in the quarter t-2) 
2ln itA -0,68*** (-4,89) 
-0,49*** 
(-3,24) 
ln (black tiger shrimp price in the quarter t-1) 
1ln itP 
2,72* 
(1,88) 
2,66* 
(1,75) 
ln (black tiger shrimp price in the quarter t-2) 
2ln itP 
 2,65 
(1,50) 
2,63 
(1,55) 
ln (white leg shrimp price in the quarter t-1) 
1ln itPm -3,81** (-2,48) 
-4,22** 
(-2,39) 
ln (white leg shrimp price in the quarter t-2) 
2ln itPm 3,50** (2,2) 
2,01 
(1,30) 
ln (mud crab price in the quarter t-2) 
2ln itPct -2,81*** (-3,31) 
-3,13*** 
(-3,30) 
ln (black tiger shrimp seed price in the quarter t) 
itPstln 1,32 (1,61) 
1,46 
(1,57) 
ln (black tiger shrimp seed price in the quarter t-2) 
2ln itPst -3,03*** (-3,50) 
-2,73*** 
(-2,98) 
Constant c 7,97 
(0,35) 
26,51 
(1,35) 
R2 0,57 0,52 
Wald statistic ( 2 value) 6,44 36,00 
Level of significance (Prob> 2 ) 0,00 0,00 
Hausman statistic ( 2 value) 71,75 
Level of significance (p-value) 0,00 
Modified Wald test ( 2 value) 5,48 
Level of significance (Prob> 2 ) 0,24 
Lagrange Multiplier Test 6,42 
Level of significance (Prob>F) 0,09 
Note: *, *** corresponds to statistical significance of 5% and 1% respectively 
Source: Summarized of estimated results in the researched provinces 
The estimated results of the supply response model in terms of the farming area have an impact on black tiger shrimp area and 
output in the current quarter (Nguyen, 2010). The estimated results show that the supply adjustment is affected by the prices of 
black tiger shrimp, of the competitive products, and input elements in accordance with supply law. 
Table 4 
Supply elasticity in short-run 
Variable name Variable Area 
Black tiger shrimp price in the quarter t-1 1 itP 2,72 
Black tiger shrimp price in the quarter t-2 2 itP 2,65 
White leg shrimp price in the quarter t-1 itPm -3,81 
White leg shrimp price in the quarter t-2 2 itPm 3,50 
Mud crab price in the quarter t-2 2 itPc -2,82 
Black tiger shrimp seed price in the quarter t itPs 1,32 
Black tiger shrimp seed price in the quarter t-2 2 itPs -3,04 
Source: Summarized and calculated in the researched provinces 
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As a result, that commercialization has a greater positive impact on the expansion of area than on the increase of the output of 
black tiger shrimp in the researched provinces in the Mekong Delta (Learn & Cochrane, 1961). This implies that black tiger 
shrimp farming in the researched provinces in the Mekong Delta is being adjusted by farmers based on the selling prices of the product 
itself and of the competitive products. However, the elasticity coefficient of these factors in the short-run is greater than in the long-
run (Tables 4 and 5). Analysis results showed that black tiger shrimp farming in the researched provinces in the Mekong Delta is not 
yet stable. 
Table 5 
Supply elasticity in long-run 
Variable name Variable Area 
Black tiger shrimp price itP 2,68 
White leg shrimp price itPm -0,15 
Mud crab price itPc -1,40 
Black tiger shrimp seed price itPs -0,85 
Source: Summarized and calculated in the researched provinces 
4. Discussion and Conclusions 
The study has used the FE estimation method for analyzing the reaction function of Nerlove supply of black tiger shrimp in the 
Mekong Delta; with the late area variable (quarter t-1 and t-2) of the previous season, the negative correlation with the variable 
area of tiger shrimp farming of the current crop. This means that farmers who increase the area of previous tiger shrimp farming 
are the factors that increase the supply to the market, the current area of black tiger shrimp farming will decrease, leading to a 
reduction in supply to the market and vice versa. At the same time, farm production decisions are related to competitive products 
and farming techniques. In the short and long term, the coefficient of supply elasticity of output at the farm gate price of the 
product, the gate price of the farm of inputs and the price of the competitive farm gate (mud crab) are elastic. However, the 
coefficient of elasticity of output supply with the price of the farm gate of the competitive product (White leg shrimp) is elastic. 
Meanwhile, the elasticity of supply in terms of the farm gate price of the product, the price of the farm gate of the input factor 
and the price of the farm gate of the competitive product are elastic. This shows that the area of tiger prawn farming is very 
sensitive before the price fluctuation of the previous crop. The supply of black tiger shrimp moved to the left before the impact 
of the increase in the price of tiger shrimp and competitive product prices. Based on the research results, suggested policy 
suggestions are as follows: 
(1) The price of the previous crop is the expected price which is the basis for farmers to decide the area of shrimp farming, later 
than the actual price, so the supply is also lagging compared to the demand in the market. Therefore, timely price forecasting 
and dissemination of price information have positive implications in timely supply adjustment. 
(2) Through analysis, results show the heavy dependence of this industry on nature. Therefore, it is necessary to have policies 
to improve capacity, market access, and production awareness to protect the environment and natural resources of shrimp 
farmers. 
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