Vertical price leadership on local maize markets in Benin

Abstract

This paper considers vertical price relationships between wholesalers and retailers on five local maize markets in Benin. We show that the common stochastic trend and the long-run disequilibrium error must explicitly be considered to correctly interpret the restrictions on the error–correction structure in terms of economic power in the channel. Interesting differences between markets are found. In the two major towns, retailers play a more prominent role in the price formation process than generally assumed in the literature on development economics. In the two larger rural centers, however, wholesalers involved in arbitrage among urban markets do influence price formation.