Vertical price transmission between market operators in Hungarian agricultural product chains

• Published in: Studies in agricultural economics (Budapest) Vol. 106; pp. 41 - 70
• Main Author: Varga, Tibor
• Format: Journal Article
• Language: English
• Published: 01.07.2007
• Edition: 1316
• Subjects: cointegration; Demand and Price Analysis; food product chain; Hungary; market power; Marketing; price transmission
• ISSN: 1418-2106
• DOI: 10.22004/ag.econ.47014

Price transmission studies related to the cointegration of price time series are a suitable means for studying market dominance at the various market levels in the food product chains. For this study a price transmission asymmetry study was carried out for 18 commercial food product chains. In this study a monthly price time series was used for the period 2001 to 2005. It was found that there is significant product variation in market dominance which spans the entire industry. However, the variation is not significantly linked to either sectors or vertical levels. At times it is unstable and can easily tilt toward the vertical partner level. Depending on price changes, it can also vary, which, in turn, reflects changes in weather conditions. Following a radical change in prices, there is almost never enough time to achieve full price restoration before the onset of another price shock. The fact that prices are not fully restored may partly explain the continuing value divergence of agricultural prices.