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Market Structure and Price Adjustment in the Iranian Tea Market

Author

Listed:
  • Seyed Safdar Hosseini

    (Department of Agricultural Economics, Faculty of Agricultural Economics and Development, University of Tehran (Corresponding Author))

  • Zahra Alizadeh Khalifehmahaleh

    (Department of Agricultural Economics, Faculty of Agricultural Economics and Development, University of Tehran, Karaj, M.Sc. in Agricultural Economics)

Abstract

This study investigates the Iranian tea market structure based on the price transmission mechanism between farm, wholesale and retail prices using annual data for the period 1977–2010. For the study of the asymmetry, the Johansen cointegration analysis was used while at the same time an Error Correction Model (ECM Model) was estimated. With the assistance of the cointegration technique, we surveyed the existence of a long-run relationship between farm and wholesale prices, farm and retail prices. The causality test showed that the farm price determines wholesale and retail prices and the wholesale price causes the retail price, whereas the reverse was determined not to be valid. In addition, application for an error correction model confirmed the existence of asymmetry in the price transmission mechanism within the farm-retail and wholesale-retail. This study used concentration ratios and a Herfindahl-Hirschman indicator to show that the market structure of the Iranian tea industry is almost exclusive. The presence of market power and the exclusive market structure of the Iranian tea industry are the main reasons for price asymmetry.

Suggested Citation

  • Seyed Safdar Hosseini & Zahra Alizadeh Khalifehmahaleh, 2013. "Market Structure and Price Adjustment in the Iranian Tea Market," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 18(2), pages 1-19, spring.
  • Handle: RePEc:eut:journl:v:18:y:2013:i:2:p:1
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    References listed on IDEAS

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    1. Giliola Frey & Matteo Manera, 2007. "Econometric Models Of Asymmetric Price Transmission," Journal of Economic Surveys, Wiley Blackwell, vol. 21(2), pages 349-415, April.
    2. Giulietti, Monica & Grossi, Luigi & Waterson, Michael, 2010. "Price transmission in the UK electricity market: Was NETA beneficial?," Energy Economics, Elsevier, vol. 32(5), pages 1165-1174, September.
    3. Lajos Zoltán Bakucs & Imre Fertõ, 2005. "Marketing margins and price transmission on the Hungarian pork meat market," Agribusiness, John Wiley & Sons, Ltd., vol. 21(2), pages 273-286.
    4. Octavio Fern?ndez-Amador & Josef Baumgartner & Jes?s Crespo-Cuaresma, 2010. "Milking The Prices: The Role of Asymmetries in the Price Transmission Mechanism for Milk Products in Austria," Working Papers 2010-21, Faculty of Economics and Statistics, University of Innsbruck.
    5. Robert Feinberg, 2008. "Import price effects on retail prices in the US and abroad: two cases," Economics Bulletin, AccessEcon, vol. 13(1), pages 1-7.
    6. Mine K. Ycel & Stephen P. A. Brown, 2000. "Gasoline and crude oil prices: why the asymmetry?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q3, pages 23-29.
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