The paper uses the Johansen cointegration approach to analyse long-run pricing strategies of pork and chicken retailers in Austria. Long-run retail pricing strategy is found to be dependent on market share and price elasticity of demand for product. A combination of mark-up pricing strategy for pork and a competitive pricing strategy for chicken is considered by retailers to yield maximum profit. Long-run price adjustment reveals linkages to pricing strategy. The versatility of the Johansen cointegration technique as a tool capable of analysing both competitive and imperfect market situations is also revealed. The paper recommends meat policy to be product specific rather than holistic.
KeywordsMarket power, markup pricing, cointegration, long run
JEL Classifications
C32, D43, L11, Q13
CommentsThe research on which this article is based began in 1995 at the Federal Institute of Agricultural Economics, Vienna, with the support of the Austrian Federal Ministry of Agriculture and Forestry. An earlier version of the paper was presented at the 264 th NFJ Seminar, Alnarp, Sweden, 1996. The author is grateful to Karl M. Ortner for the data and to Robert M. Kunst, Karl M. Ortner, Martin Wagner, and seminar participants for useful comments on earlier drafts.
Tests for the efficiency of commodity arbitrage typically fail to find cointegration relationships between spot and futures prices and between markets. The reported study investigates the issue for spot and futures prices of cocoa on New York and London markets by means of the Johansen maximum likelihood approach adding interest rates as conditioning variables. The results indicate that interest rates may play an important role in establishing the hypothesized relationships. It is further found that futures prices Granger-cause spot prices, but not vice versa. This is interpreted as evidence for spot prices reacting slowly to new information.
The study uses the linear AIDS technique to analyse how consumers of cassava food products in the Lagos metropolitan area react to economic and demographic factors and how consumer reactions can be captured to bring about effective policy formulation for food security and poverty alleviation through value added agricultural production. The results establish that demographic factors such as religion and residential area help to explain perceived variations in the consumption of cassava food products. Given that demand is price-inelastic for all cassava food products examined in the study, declining prices stemming from a bumper cassava crop harvest would lead to corresponding declines in producer revenues. In view of the high expenditure elasticities, therefore, a policy option that would boost productivity and incomes of consumers is considered desirable. Such a policy could be one that saps off excess farm labour through maintaining and promoting investment in the food-processing sector.
We propose a new time series model aimed at forecasting crude oil prices.The proposed specification is an unobserved components model with an asymmetric cyclical component. The asymmetric cycle is defined as a sine-cosine wave where the frequency of the cycle depends on past oil price observations. We show that oil price forecasts improve significantly when this asymmetry is explicitly modelled.
The paper investigates the extent to which the dollar/sterling exchange rate fluctuations affect coffee and cocoa futures prices on the London LIFFE and the New York CSCE by means of multivariate GARCH models -under the assumption that traders in perfectly competitive markets have equal access to all available information on changes in weather and in global demand and supply conditions. In three out of the four investigated cases, exchange rate posed as a main source of risk for the commodity futures price. The significance and form of volatility spill-over effects of a bilateral exchange rate are shown to be specific for commodity and market. A forecasting comparison on the basis of the identified models suggests that possible gains in prediction accuracy may be small.
KeywordsCommodity markets, multivariate GARCH models, exchange rates, volatility, forecasting
JEL Classifications
C32, C53, G15, Q14Comments We wish to thank Richard Baillie for providing us with a basic univariate GAUSS program code for the estimation of GARCH models that has helped us much in developing our bivariate ARCH model.
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