Noisy Vertical Markets

Raghbendra Jha and Hari Nagarajan

ASARC Working Papers from The Australian National University, Australia South Asia Research Centre

Abstract: In vertical markets volatility at one level of the market may transmit itself to another level. This paper examines the linkages that exist between spreads at different levels of the market hierarchy in Indian rice markets. It highlights the behavior of spreads in the presence of information asymmetry. This causes spreads to overshoot their equilibrium values. Second, we model possible differences between the reaction to an upward revision of the spread from that to a downward revision. We also propose policy prescriptions such that the policy maker can target specific levels of the market verticality given an understanding of the process of transmission and the magnitude of noise trading.

Keywords: Vertical markets; Partial adjustment; Asymmetric price transmission (search for similar items in EconPapers)
JEL-codes: C32 D43 Q13 Q18 (search for similar items in EconPapers)
Pages: 28
Date: 2002
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pas:asarcc:2002-04

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