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DISTINGUISHING BETWEEN EQUILIBRIUM AND INTEGRATION IN MARKETS ANALYSIS

Jau-Rong Li and Christopher Barrett ()

No 14607, Working Papers from International Agricultural Trade Research Consortium

Abstract: This paper introduces a new market analysis methodology based on maximum likelihood estimation of a mixture distribution model incorporating price, transfer cost, and trade flow data. Not only does this method obviate statistical problems associated with conventional price analysis methods, it also permits differentiation between market integration and competitive market equilibrium. The model generates estimates of the frequency of alternative regimes, combinations of which provide useful, intuitive measures of intermarket tradability, competitive market equilibrium, perfect integration, segmented equilibrium, and segmented disequilibrium. An application to trade in soybean meal among Pacific Rim economies demonstrates the usefulness of the method.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iatrwp:14607

DOI: 10.22004/ag.econ.14607

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