Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery
AbstractThis paper develops and applies a methodology to test for efficiency of interregional commodity arbitrage. Application of the methodology requires only time-series data on prices for alternative cities, regions, countries, or product forms. Yet, the approach is capable of generating evidence on a number of market parameters including market integration, arbitrage efficiency, the magnitude of marketing margins, product substitutability, and competitiveness of markets. Estimation is based on a switching regression model with three regimes: efficient arbitrage, relative shortage, and relative glut. Results from application of the model to U.S. celery marketing indicated significant departures from efficient arbitrage for both California and Florida celery.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 1609.
Date of creation: 01 Jan 1991
Date of revision:
Publication status: Published in American Journal of Agricultural Economics, January 1991, vol. 70, pp. 568-80
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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