Chocolate price fluctuations may cause depression: an analysis of price pass-through in the cocoa chain

Catherine Araujo Bonjean () and Jean Brun ()

No 201420, Working Papers from CERDI

Abstract: The aim of this paper is to explore the channels of transmission of the fluctuations in the world price of cocoa to the consumer of chocolate bars in France. This case study can be considered as an illustration of a more general pattern of asymmetric vertical price transmission in the commodity-final product chain. Two types of asymmetry are suspected: asymmetry in the transmission of positive and negative shocks that may reflect non-competitive behavior in the chocolate industry and asymmetry in the transmission of small and large shocks that may be due to adjustment costs. These hypotheses are tested using a three-regime error correction model. Results show that adjustment costs in the processing, manufacturing and distribution of the chocolate tablet are important. Moreover, increases in the cocoa price are more fully and rapidly transmitted to consumers than decreases. These findings may be interpreted as the manifestation of the market power of chocolate companies.

Keywords: Chocolate chain; TAR model; Asymmetric price transmission (search for similar items in EconPapers)
JEL-codes: C32 F23 Q13 (search for similar items in EconPapers)
Pages: 26
Date: 2014-09
New Economics Papers: this item is included in nep-mkt
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Working Paper: Chocolate price fluctuations may cause depression: an analysis of price pass-through in the cocoa chain (2014)
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