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Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery

Richard J. Sexton, Catherine Kling () and Hoy Carman

American Journal of Agricultural Economics, 1991, vol. 73, issue 3, 568-580

Abstract: This paper develops and applies a methodology to test for efficiency of interregional commodity arbitrage. Application of the methodology requires only time-series data on prices for alternative cities, regions, countries, or product forms. Yet, the approach is capable of generating evidence on a number of market parameters including market integration, arbitrage efficiency, the magnitude of marketing margins, product substitutability, and competitiveness of markets. Estimation is based on a switching regression model with three regimes: efficient arbitrage, relative shortage, and relative glut. Results from application of the model to U.S. celery marketing indicated significant departures from efficient arbitrage for both California and Florida celery.

Date: 1991
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Related works:
Working Paper: Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery (1991)
Working Paper: Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery (1990) Downloads
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