Distinguishing between Equilibrium and Integration in Markets Analysis

23 Pages Posted: 14 Oct 1999

See all articles by Christopher B. Barrett

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management

Jau-Rong Li

I-Shou University

Multiple version iconThere are 3 versions of this paper

Date Written: August 1999

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.

JEL Classification: L10

Suggested Citation

Barrett, Christopher B. and Li, Jau-Rong, Distinguishing between Equilibrium and Integration in Markets Analysis (August 1999). Available at SSRN: https://ssrn.com/abstract=169948 or http://dx.doi.org/10.2139/ssrn.169948

Christopher B. Barrett (Contact Author)

Cornell University - Charles H. Dyson School of Applied Economics & Management ( email )

315 Warren Hall
Ithaca, NY 14853-7801
United States
607-255-4489 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://aem.cornell.edu/faculty_sites/cbb2/

Jau-Rong Li

I-Shou University ( email )

Kaohsiung
Taiwan
(886)-935654172 (Phone)
(886)-76577056 (Fax)

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