Asymmetric price transmission: a case study of the French hake value chain

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Abstract

Asymmetry in price transmission has recently attracted much attention in the food literature, but hitherto this important issue has been overlooked in fish and fish product market studies. This paper seeks to fill this gap, and thus takes the fisheries market literature closer to the general food literature. To this end, an asymmetric error correction price transmission model has been estimated for the whole fresh French hake value chain. This paper tests for cointegration between auction and retail prices using the Engle and Granger two-step method, and the Enders and Granger Threshold Autoregression (TAR) and Momentum Autoregression (M-TAR) methodologies. The results present clear evidence of asymmetric price transmission in the whole hake value chain and that the assumption of symmetric adjustment in this sector produces misleading and biased results. The price response behaviour of retailers is found to be consistent with asymmetric price transmission: retailers immediately respond to positive changes in auction prices by adjusting their prices upward, but they do not react as quickly to falling auction prices. These findings have profound implications for studying margins along the value chain of fish and fish products. By ignoring the asymmetry in price transmission at different levels of the value chain, calculations of margins will be biased.
Original languageEnglish
Pages (from-to)511-523
Number of pages13
JournalMarine Resource Economics
Volume19
Issue number4
Publication statusPublished - 2005

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