Premium
Distinguishing between Equilibrium and Integration in Spatial Price Analysis
Author(s) -
Barrett Christopher B.,
Li Jau Rong
Publication year - 2002
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 - 10.1111/1467-8276.00298
Subject(s) - disequilibrium , economics , econometrics , market integration , competitive equilibrium , distribution (mathematics) , microeconomics , mathematics , medicine , mathematical analysis , ophthalmology
This article introduces a new spatial price analysis methodology based on maximum likelihood estimation of a mixture distribution model incorporating price, transfer cost, and trade flow data. This method permits differentiation between market integration and competitive market equilibrium and derivation of intuitive measures of intermarket tradability, competitive market equilibrium, perfect integration, segmented equilibrium, and segmented disequilibrium. One can also use these estimates to derive semiparametric measures of time‐varying regime probabilities to track changing market conditions. An application to trade in soybean meal among Pacific Rim economies demonstrates the usefulness of the method.