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Chocolate price fluctuations may cause depression: an analysis of price pass-through in the cocoa chain

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  • Catherine ARAUJO BONJEAN

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Jean-François BRUN

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

Abstract

The aim of this paper is to explore the channels of transmission of the fluctuations in the world price of cocoa to the consumer of chocolate bars in France. This case study can be considered as an illustration of a more general pattern of asymmetric vertical price transmission in the commodity-final product chain. Two types of asymmetry are suspected: asymmetry in the transmission of positive and negative shocks that may reflect non-competitive behavior in the chocolate industry and asymmetry in the transmission of small and large shocks that may be due to adjustment costs. These hypotheses are tested using a three-regime error correction model. Results show that adjustment costs in the processing, manufacturing and distribution of the chocolate tablet are important. Moreover, increases in the cocoa price are more fully and rapidly transmitted to consumers than decreases. These findings may be interpreted as the manifestation of the market power of chocolate companies.

Suggested Citation

  • Catherine ARAUJO BONJEAN & Jean-François BRUN, 2014. "Chocolate price fluctuations may cause depression: an analysis of price pass-through in the cocoa chain," Working Papers 201420, CERDI.
    • Handle: RePEc:cdi:wpaper:1608
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    More about this item

    Keywords

    Chocolate chain; TAR model; Asymmetric price transmission;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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