Price relationships along the value chain: An analysis of hake markets in France and Spain
By Jessica Hartmann, Frank Asche and Shabbar Jaffry
ABSTRACT
In this paper we use cointegration analysis and the Law of One Price to test for proportionality between hake prices at different stages along the value chain in the Spanish and French hake markets. Cointegration analysis is an appropriate means of testing for price proportionality when price series are non-stationary, as was found to be the case for hake prices in both France and Spain. Estimates of the relative size of mark-ups along the value chain are calculated by applying the Law of One Price to the cointegrated price series. This approach also allows us to test whether derived demand elasticities contain information about consumer elasticities. Finally, we test for weak exogeneity of hake prices in order to determine how price information is transmitted through the value chain.
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