Distinguishing between Equilibrium and Integration in Markets Analysis

International Agricultural Trade Research Consortium Working Paper No. 99-8

23 Pages Posted: 17 Oct 1999

See all articles by Jau-Rong Li

Jau-Rong Li

I-Shou University

Christopher B. Barrett

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

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: F0, Q1, L1, D4

Suggested Citation

Li, Jau-Rong and Barrett, Christopher B., Distinguishing between Equilibrium and Integration in Markets Analysis (August 1999). International Agricultural Trade Research Consortium Working Paper No. 99-8, Available at SSRN: https://ssrn.com/abstract=185371 or http://dx.doi.org/10.2139/ssrn.185371

Jau-Rong Li

I-Shou University ( email )

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

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/

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