Nonhomogeneous products and the law of one price
Law of One Price (LOP) is important in the theory of international trade. It is important in LOP studies to have data that accurately represents homogeneous products (i.e., the product in one country has the same product characteristics as the product in another country). We present a theoretical model that determines fresh grapefruit prices Free on Board (FOB) at the packinghouse. The first order conditions show that the FOB packinghouse prices are equal for products with the same product characteristics. The theoretical conditions show a difference in FOB prices when the product characteristics are different. The product characteristics that are varied include packing costs and pack-out rates. The results from a nonlinear programming optimization routine demonstrates the importance of using data that accurately represents homogeneous products for LOP studies. Different packing costs and pack-out percentages are shown to cause different FOB packinghouse prices for fresh grapefruit destined for domestic and export markets. [JEL Classification: Q11, Q13, F14]. © 2007 Wiley Periodicals, Inc. Agribusiness 23: 407-420, 2007.
Volume (Year): 23 (2007)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brown, Mark G. & Lee, Jonq-Ying, 2002. "Restrictions on the Effects of Preference Variables in the Rotterdam Model," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 34(01), pages 17-26, April.
- Mohanty, Samarendu & Peterson, E. Wesley F. & Smith, Darnell B., 1998. "Fractional Cointegration and the False Rejection of the Law of One Price in International Commodity Markets," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 30(02), pages 267-276, December.
- Brown, Mark G. & Lee, Jonq-Ying, 2002. "Restrictions On The Effects Of Preference Variables In The Rotterdam Model," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 34(01), April.
- Mark J. Gehlhar & Daniel H. Pick, 2001. "Food trade balances and unit values: What can they reveal about price competition?," Agribusiness, John Wiley & Sons, Ltd., vol. 18(1), pages 61-79.
When requesting a correction, please mention this item's handle: RePEc:wly:agribz:v:23:y:2007:i:3:p:407-420. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.