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Effects of Forward Sales on Spot Markets: Pre‐commitment Sales and Prices for Fresh Strawberries
Author(s) -
Mohapatra Sandeep,
Goodhue Rachael E.,
Carter Colin A.,
Chalfant James A.
Publication year - 2010
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aap028
Subject(s) - spot contract , spot market , volatility (finance) , autoregressive conditional heteroskedasticity , economics , business , monetary economics , financial economics , electricity , electrical engineering , engineering , futures contract
Increasingly, agricultural markets are vertically coordinated. Often a thinning spot market coexists with coordinated transactions, raising the question of how private coordination affects the market as a whole. One of the greatest challenges when analyzing such market‐level effects is obtaining information on private transactions. We utilize publicly available data to evaluate how informal contracts in the fresh strawberry market affect spot market prices using a generalized autoregressive conditional heteroskedastic in mean (GARCH‐M) model. We find that these informal contracts increased spot prices, as argued by some industry members, while the effect on spot price volatility varied by production region.