This paper proposes a test for orthogonality of the errors in a vector error-correction model (VECM) that focuses on the recursive ordering among the contemporaneously correlated errors. The test is based on the fact that when the frequency of the data is sufficiently low one of the variables in the long-run equilibrium relationship adjusts fully within the same period to its new equilibrium level. An empirical investigation of the relationship between spot and futures prices for commodities traded on the Amsterdam Exchanges and the Chicago Board of Trade reveals that the spot price adjusts fully to its new equilibrium level if the price-discovery function of the futures market works well.

SummaryThe price gap between organic and conventional food might explain the low market share of organics in the Netherlands. A real-life experiment was carried out in 2006 in order to determine the price sensitivity of consumer demand for organics. Consumer prices of selected organic products were reduced by up to 40% below current market levels. The price elasticity of demand was low, because not all consumers perceived the price reductions. Moreover, the offer of organic varieties is limited, as is the consumer's willingness to pay for the social attributes of organics.

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