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Examination of existence of the law of one price at Czech meat markets

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  • Rumankova, Lenka

Abstract

This paper deals with the problem of the law of one price. The topic is examined on wholesaler level of pig meat and beef meat agri-food chains in the Czech Republic. The aim of the paper is to examine whether the law of one price holds at these markets. To fulfill the aim the multivariate time series analysis is employed, concretely co-integration analysis and Vector error correction model (VECM). The analysis is based on time series of wholesale price in individual regions of the Czech Republic which contain bi-weekly data in period from May 2004 to June 2011. The analysis shows that the law of one price does not hold at both markets. However, if the transaction costs are omitted there might be found some regions where it works. Finally, some dominant as well as submissive regions were detected at both pig meat as well as beef meat market.

Suggested Citation

  • Rumankova, Lenka, 2012. "Examination of existence of the law of one price at Czech meat markets," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 4(1), March.
  • Handle: RePEc:ags:aolpei:131356
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    File URL: http://purl.umn.edu/131356
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    References listed on IDEAS

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    1. Teresa Serra & José M. Gil & Barry K. Goodwin, 2006. "Local polynomial fitting and spatial price relationships: price transmission in EU pork markets," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(3), pages 415-436, September.
    2. Barry K. Goodwin & Matthew T. Holt & Jeffrey P. Prestemon, 2011. "North American Oriented Strand Board Markets, Arbitrage Activity, and Market Price Dynamics: A Smooth Transition Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(4), pages 993-1014.
    3. Marten Graubner & Alfons Balmann & Richard J. Sexton, 2011. "Spatial Price Discrimination in Agricultural Product Procurement Markets: A Computational Economics Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(4), pages 949-967.
    4. Frank Asche & Helge Bremnes & Cathy R. Wessells, 1999. "Product Aggregation, Market Integration, and Relationships between Prices: An Application to World Salmon Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 568-581.
    5. Hockmann, Heinrich & Voneki, Eva, 2007. "Assessing Market Functioning: The Case of the Hungarian Milk Chain," 104th Seminar, September 5-8, 2007, Budapest, Hungary 7805, European Association of Agricultural Economists.
    6. Babiker, Babiker Idris & Abdalla, Abdel Gabbar M., 2009. "Spatial price transmission: A study of sheep markets in Sudan," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 3(1), March.
    7. Bakucs, Lajos Zoltan & Ferto, Imre, 2007. "Spatial Integration On The Hungarian Milk Market," 104th Seminar, September 5-8, 2007, Budapest, Hungary 7832, European Association of Agricultural Economists.
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