Who Leads the Price in Honolulu’s Food Market? An Evaluation of the Competitiveness of Local Foods

Abstract

We investigate the market dynamics of local and imported foods in Honolulu’s retail market. Our study employs weekly Nielsen scanner data covering 3 years for four selected foods, namely lettuce, tomatoes, milk, and eggs. The results from vector-autoregressive models and impulse response functions indicate that the prices of imported foods are exogenously determined while prices of local foods are responsive to variations in the prices of their imported counterparts. Moreover, imported food sales seem to recover faster after a price shock than local food sales, perhaps because of consumers’ relatively higher dependence on cheaper imported foods. One important policy implication from the findings is that Hawaii’s food marketers need to further differentiate their products, even in the low-price categories, in order to face competition from imports.