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The role of temperature for seasonal market integration: a case study of poultry in Iran *
Author(s) -
Zamani Omid,
Bittmann Thomas,
Loy JensPeter
Publication year - 2022
Publication title -
australian journal of agricultural and resource economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 1364-985X
DOI - 10.1111/1467-8489.12443
Subject(s) - market power , market integration , economics , consumption (sociology) , database transaction , transaction cost , market price , value (mathematics) , vertical integration , econometrics , microeconomics , agricultural economics , industrial organization , social science , machine learning , sociology , computer science , programming language , monopoly
Understanding market integration has greatly benefited from analysing and comparing variations in price transmissions. An important source of variation in agricultural markets is seasonal changes in production, consumption and transaction costs. A key factor driving seasonality in agricultural price is temperature, as supply and demand changes are triggered by seasonal temperature differences. In this paper, we study the seasonal variations in vertical price transmission focusing on the asymmetric price adjustment to analyse changes in the market interactions between the stages of the value chain. Our data reveal significant transitory effects of temperature on the price transmission process. Results of a panel threshold model suggest that the farm–wholesale price adjustments to deviations from the market equilibrium are more symmetric at higher temperatures. However, we do not find an effect of temperature on the wholesale–retail price relationship. Our findings can be rationalised with wholesalers making use of their market power to extend their margins in the upstream chain. Wholesaler market power is lower during warm periods, and price adjustment is more symmetric. Concerning the Iranian poultry value chain, our findings imply that temperature‐related differences in market interactions should be considered in formulating policy interventions.