Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery
This 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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|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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