Wholesale Spreads and the Dynamics of Retail Price Volatility

Jha, Raghbendra; Nagarajan, Hari K.

doi:10.2139/ssrn.2167189

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Wholesale Spreads and the Dynamics of Retail Price Volatility

IIM Bangalore Research Paper No. 123

17 Pages Posted: 3 Nov 2012

See all articles by Raghbendra Jha

Raghbendra Jha

Indira Gandhi Institute of Development Research (IGIDR)

Hari K. Nagarajan

Indian Institute of Management Bangalore

Date Written: December 30, 1998

Abstract

This paper proposes a general model of asymmetric price transmission at the retail level to examine the volatility of retail spreads in vertical markets, with endogenous overshooting of the wholesale spreads. The model is tested with Indian data and detects significant levels of asymmetry in price transmission. In addition it is found that endogenizing the instability at the wholesale level is significant in explaining volatilities of retail spreads.

Keywords: volatility of retail spreads, vertical markets, partial adjustment models

JEL Classification: C32, D43, Q13. Q18

Suggested Citation: Suggested Citation

Jha, Raghbendra and Nagarajan, Hari K., Wholesale Spreads and the Dynamics of Retail Price Volatility (December 30, 1998). IIM Bangalore Research Paper No. 123, Available at SSRN: https://ssrn.com/abstract=2167189 or http://dx.doi.org/10.2139/ssrn.2167189