Asymmetric Price Transmission and Market Power: A Case of the Aquaculture Product Market in China

Abstract

In the aquaculture product market, the efficiency of vertical price transmission is an important manifestation, representing the marketization level of aquatic products. When the price of any sector in the aquatic product industry chain fluctuates slightly, the welfare of each sector will be affected accordingly. This study focuses on carp, the main freshwater fish in China, to explore the relationship between asymmetric price transmission and market power. We use the nonlinear autoregressive distributed lag model to simultaneously describe the short- and long-term asymmetric effects of wholesale-to-retail prices for carp, and apply the asymmetric autoregressive conditional heteroskedasticity model to analyze the differences in market power between wholesalers and retailers. The results confirm the evidence of a nonlinear cointegration between wholesale and retail prices in the carp market. There are also significant asymmetric effects in both the short- and long-term transmission speed and degree of price transmission from the wholesale to the retail market. It is evident that carp wholesalers have strong control over the price, resulting in an asymmetric effect in vertical price transmission, indicating a need to improve the development level and integration degree in the Chinese aquatic products market. Subsequently, the government should develop effective systems for aquatic product circulation, strengthen supervision over the aquatic product wholesale market, and establish a public aquatic product price platform to promote the healthy and stable development of China’s aquatic product market.