Asymmetric Price Research Articles

The COVID-19 Pandemic and Dynamics of Price Adjustment in the U.S. Beef Sector

This research investigates the impact of the COVID-19 pandemic on the dynamics of vertical price transmission in the U.S. beef industry using monthly farm, wholesale, and retail prices for the period 1970–2021. Contemporary time-series techniques and historical decomposition graphs were used to test for possible asymmetries and structural breaks in the price transmission across the beef supply chain. The results show that the impact of COVID-19 has been uneven across the beef marketing channel, with consumers and farmers sharing the burden of the shock. Historical decomposition graphs demonstrated that the COVID-19 pandemic caused consumers paying higher prices, but farmers receiving lower prices than their predicted values. Hence, both consumers and farmers in the U.S. beef supply chain were adversely affected by the COVID-19 pandemic. Furthermore, the results detected asymmetric price adjustments along the U.S. beef supply chain, both in speeds and magnitudes, with the wholesale prices being more flexible, adjusting quicker than farm and retail prices. The results indicated that the U.S. beef markets were resilient enough to absorb the shock and return to their pre-shock patterns in 4 to 6 months. These results have welfare and policy implications for the U.S. beef industry.

Welfare impact of asymmetric price transmission on rice consumers in Bangladesh

AbstractThis study investigates asymmetric price transmission (APT) in the rice market in Bangladesh using monthly price series at farm, wholesale, and retail levels from October 2005 to June 2017 in a nonlinear autoregressive distributed lag model (NARDL). The results indicate a significant asymmetric relationship across price at retail, wholesale, and farm levels in the long and short term. While wholesalers/millers benefit from the imperfect price transmission at the expense of farmers, retailers gain over wholesalers/millers. We find that the consumer surplus decreases from a price rise at the wholesale or farm level, but consumers do not enjoy a proportional increase in their surplus from a price reduction. The study reveals that the consumer welfare loss due to APT along the rice value chain of Bangladesh is equivalent to US$89.05 million per month. This estimated aggregate welfare loss requires both the attention of decision‐makers and corrective actions.

Asymmetry and transmission of international price shocks of cocoa and coffee in Togo

This study assesses the mechanism of the transmission of international price shocks to producer prices of coffee and cocoa in Togo. A threshold autoregressive (TAR) model was estimated using monthly series of international and producer prices of coffee and cocoa in Togo from 1994 to 2018. The results show that there is asymmetric transmission of international price shocks to producer prices. Domestic prices respond less quickly to international price increase than decreases. The asymmetric price transmission is similar in term of the speed of adjustment for the two commodities. In order to deal with this phenomenon, further investigations need to be done to detect the reasons for the asymmetry in price transmission between domestic and international coffee and cocoa markets.

The elasticity of residential electricity demand and the rebound effect in 18 European Union countries

ABSTRACT This study investigates income and price elasticities of residential electricity demand and electricity rebound effect using the annual panel data of 18 European Union countries. Quantile regression results show that income elasticities are higher in lower quantiles, whereas price elasticities are uniform in all quantiles. Three fixed-effect estimators provide consistent results, with the scale of long-run income and price elasticities increasing compared to short-run elasticities. In the short run, the derived elasticities of electricity demand are 0.08 for income and −0.03 for price, whereas in the long run, they are at 1.17 for income and −0.43 for price. In addition, asymmetric price response is observed, estimating the rebound effect in the decomposed price model. Our empirical results suggest that European governments implement policies that accelerate improvements to electricity efficiency and invigorate the retail electricity market, making residential electricity prices more transparent to consumers.

Price transmission in milk supply chain in Ukraine

Purpose. The purpose of the study, which results are submitted in the article, is to analyze the vertical price transmission along the milk supply chain in Ukraine and identify whether this price transmission is symmetric or asymmetric in terms of direction, magnitude, speed. 
 Methodology / approach. To achieve the purpose of the study, we used the following research methods: logical operations (analysis, synthesis, induction, deduction) – to determine the structure of the milk supply chain, to make conclusions about main findings; the correlation analysis – to identify the tightness of links between farm’, processors’ and retailers’ prices; the trend modelling – to build the functions of the trend of prices of different levels of the milk supply chain; the regression modelling – to construct the regression functions of prices of downstream sectors of the milk supply chain; graphic – for visual presentation of main tendencies, pricing and price dynamics in the milk supply chain. The research was performed on the basis of the statistical data of the State Statistics Service of Ukraine for 2013–2020.
 Results. This paper presents the empirical evidence of asymmetric price transmission along the milk supply chain in Ukraine. The results of modelling proved asymmetric magnitudes of price growth at the organizational and technological stages of the milk supply chain: in the case of the farm prices of raw milk increase the processors’ and retailers’ prices grow up by a much bigger magnitude. There is no leg in price transmission in the milk supply chain, the price shocks at the farm level instantly pass to processors’ and retailers’ prices. The evidence of asymmetry of price transmission testifies the weaknesses of the market positions of farmers and consumers in the milk supply chain in Ukraine, points out the threats for the food security and sustainable development of all agents of this chain. 
 Originality / scientific novelty. For the first time, the quantitative assessments of the magnitude and speed of the price changes in the process of price transmission in the milk supply chain in Ukraine were obtained. The asymmetry of the magnitudes of the vertical price transmission in the milk supply chain in Ukraine was identified. The hostage position of farmers in the case of price shocks was further proved.
 Practical value / implications. This paper provides a better understanding of arrangements of market forces in the milk supply chain, the consequences of price chocks in the upstream sector of the milk supply chain. The practical value is the methodological and empirical support for the development of regulative measures to improve the milk supply chain’s functioning and sustain food security. Assessment and analysis of the mechanism of price transmission reveals the weak parts of the food supply chain, contributing to the scientific foundation of elaborating the necessary policy actions for harmonization of relations between producers of different stages of the milk chain.

Asymmetric Price Transmission: A Case of Wheat in India

In the present paper, horizontal and vertical integration was carried out on the wholesale and retail prices of wheat in the major markets of India. On confirming cointegration between the wholesale and retail prices of wheat in all needs, the vector error correction model (VECM) was applied to find the speed of adjustment in the corresponding price channel. The results revealed that price signals are transmitted across regions, indicating that price changes in one market are consistently related to price changes in markets and can influence the prices in other markets. In addition to studying cointegration, threshold autoregressive (TAR) and Momentum TAR (MTAR) models were applied to test for asymmetric cointegration. Hasen and Seo’s test was used to test for the presence of threshold cointegration. It revealed a significant presence of asymmetric and nonlinear cointegration in many markets. Accordingly, a threshold VECM (TVECM) model with two regimes was applied. The results indicate that the retail price significantly responds to the deviations from the long-run equilibrium compared to the wholesale price.

Price asymmetries in the US airline industry

AbstractWe document price asymmetries in the US airline industry. We find evidence that the average airfare increases in response to rising fuel cost but does not decrease in response to declining fuel cost. In searching for the cause of price asymmetries, we find that common ownership, measured by overlapping institutional investors, is associated with greater price asymmetry in the airline industry. To mitigate endogeneity concerns, we exploit the variation in common ownership induced by the financial institution mergers and conduct a difference‐in‐differences test to establish the causal effects of common ownership on price asymmetry in the airline industry. In addition, airlines in highly concentrated markets exhibit more price asymmetries than those in low concentration markets. Our results support focal price tacit collusion as an important determinant of asymmetric pricing. Furthermore, first‐class airfares are shown to decrease more slowly than economy‐class airfares in response to fuel cost decreases, which supports consumer search as the mechanism driving asymmetric pricing.

Asymmetric price effects on food demand of rural households: Panel evidence from China

This study aims at detecting asymmetric price effects on food demand for rural households and compares different specifications for including reference prices in demand models. Different from the standard demand model, asymmetric price effects on food demand imply that households react stronger to price increases than price decreases as compared with the reference price. This study tests for asymmetric price effects on food demand separately for pure consumers and farmers in rural areas for the first time. Using three waves of a rural household panel survey in six poor counties of China, this study shows asymmetric price effects on demand for rice and potatoes for pure consumers, and for pork for farmers. Comparisons of different methods of specifying the reference price in demand models show that the model adding price increase and price decrease terms to the standard demand model has a coherent foundation in demand theory and incorporates both acquisition and transaction utility. Although this model had a slightly better fit to the data than the segmented price model—separating people facing price decreases from people facing price increases—it hardly showed evidence of asymmetric price effects. Asymmetric price effects were mostly found to be significant in the segmented price model. Taking into account asymmetric price effects in food demand analysis uncovers the complexity of the mechanism of price effects on demand under different price change directions and may be helpful in estimating less biased price elasticities. Possible causes of mixed asymmetric price effects for different food items and different types of households are discussed.

Behavioral response to price: Data-based insights and future research for retailing

An important area of pricing research is behavioral response to price. Researchers have studied topics such as the psychophysics of price (the relationship between stimulus and response), willingness-to-pay, the price-quality relationship, and other topics. In this paper, an integrated review, critical analysis, and synthesis of the extensive extant research in four critical areas of behavioral response to price are examined: reference price, latitude of price acceptance, asymmetric price response, and perception of fairness in pricing. As an integral part of the review and analysis, the theoretical underpinnings of these four concepts are presented. Retailing decisions and strategies are directly related to consumer behavioral response to pricing policies: managers want to know what the width of latitude of price acceptance might be, or if there is heterogeneity in the loss aversion effect, and what the moderators of this effect could be. Our review, analysis, and synthesis yield a rich set of data-based insights. For instance, the width of latitude of price acceptance is 1.5 times the price variability, and the width is larger below the reference price. Additionally, loss aversion is robust across businesses, as well as categories and methods of study, but the specific estimates of the effect range from a low of 1.31 to a high of 3.5. Where applicable, the antecedents and moderators of these insights are investigated, such as: loss aversion is moderated by product knowledge (with greater knowledge, the effect is more attenuated), and, in revenue management retail businesses such as hotels and restaurants, by familiarity of pricing practices (greater familiarity, lower loss aversion effect).

Asymmetric Price Transmission of Red Chili Market in North Sumatra Province, Indonesia

The high disparity in red chili prices between producer prices and consumer prices indicates that farmers and consumers do not benefit from the red chili trade, due to the long marketing channels and market power of intermediaries. Prices that fluctuate and do not reflect actual market conditions indicate the inefficiency of marketing agents is called asymmetric price transmission. This study aims to analyze the transmission pattern of red chili prices from producer to consumer level in North Sumatra Province. The analytical model used in this study is the Asymmetric Error Correction Model (AECM). The data used is secondary data that is systematically recorded in the form of monthly time series data from 2016-2020. The results showed that the price transmission between red chili marketing institutions in North Sumatra Province is asymmetric in the short term and long term in the wholesale-producer and wholesale-consumer relationships.

양식 조피볼락의 산지·도매시장간 비대칭적 가격전이 분석

The purpose of this study is to empirically investigate the asymmetric price transmission(APT) of aquacultured rockfish between the producer and the wholesale markets through an econometrics model and to present policy implications based on the analysis results. The APT between the producer and the wholesale markets of aquacultured rockfish was analyzed by using the autoregressive distributed lag(ARDL) model. In the Tongyeong-Incheon model, it was analyzed that there was no APT, but in the Yeosu-Incheon model, it was analyzed that a positive(+) APT existed. In particular, when the distribution route from the producer to the wholesale is simple or the dependence on a specific wholesale market is high, the APT exists in the distribution market, and it operates inefficiently. Therefore, in order to solve the APT between the producer and the wholesale distribution markets in aquacultured rockfish, it is necessary for producers to use online distribution platforms actively, and the government needs to promote the establishment of a distribution center specialized in live fish.

Synchronized movement between US lumber futures and southern pine sawtimber prices and COVID-19 impacts

We analyzed the synchronized movements of lumber futures and southern pine sawtimber stumpage prices in the United States since 2011 and their response to COVID-19 events using wavelet analysis and event study. We found that the sawtimber and lumber prices have followed complex comovement patterns in the time–frequency domain and both reacted to COVID-19 events with a higher response intensity of the lumber price. Although they reacted differently to the early COVID-19 episodes and vaccine news, the sawtimber and lumber prices responded similarly to the COVID-19 pandemic declarations by the World Health Organization and US president, the US Food and Drug Administration panel’s recommendation of the first COVID-19 vaccine, and economic stimulus legislation. The patterns of synchronized movements between the sawtimber and lumber prices varied with time and frequency, but their comovement at low frequencies (>64 weeks) has strengthened since 2014 and been led by the lumber futures price; COVID-19 episodes have not changed this trend. The different magnitude of response of the two prices to the COVID-19-related events, as well as the long-term dominance of the lumber price in the comovement, reveals asymmetric price negotiation power and benefit distributions among the agents of the lumber value chain.

ANALYZING PRICE TRANSMISSION IN THE NIGERIAN CATTLE MARKET

The study analysed price transmission in the Nigerian cattle market. Time series price data, for ten states (Borno, Cross River, Edo, Kano, Nassarawa, Osun, Oyo, Plateau, Yobe and Zamfara) for the years, 2002-2017 were used for the analysis. The summarised result on Threshold Vector Error Correction model showed that positive and negative deviations for eight states (Borno, Cross River, Edo, Nassarawa, Osun, Plateau, Yobe and Zamfara) exceeded their respective threshold values. Also all the values of the above threshold values are not equal to the below threshold values,indicating the presence of asymmetric transmission. The presence of asymmetric transmission showed price changes along the chain (from farmer/marketer to consumer) was greater than the market costs of handling cattle and agents will be in a greater position to implement price changes before transmission takes place. This indicates strong asymmetric price transmission since price changes moved from bottom of the chain to the top. There is need to improve on the market information system in the country so that information will flow to all the markets.

Identifying the asymmetric price dynamics of Islamic equities: Implications for international investors

This study investigates the long-run asymmetric price dynamics of Islamic equity indexes and their conventional peers during the 2002–2018 period with respect to global equity prices (represented by a broad global equity index). We applied hidden cointegration and asymmetric causality tests to the indexes for 20 developed and 17 developing countries. Our findings have revealed neither the positive nor negative components of Islamic and conventional indexes to be cointegrated with the broad global equity index apart from a few cases. Rather than hidden cointegration results, we have found significant asymmetric causality effects, particularly in developing countries. Our findings suggest that neither the Islamic or conventional indexes share any common stochastic trend with the broad global equity index in bear and bull markets, which implies different degrees of downward and upward rigidities in the aggregate series. The conclusion section of the research illustrates the implications for international investors.

Testing for the Sources Asymmetric Price Response: The Case of International Wheat

Testing for the Sources Asymmetric Price Response: The Case of International Wheat

Asymmetric Price Adjustments in the Shanghai Containerized Freight Index (SCFI): Evidence from a Non-Linear Autoregressive Distributed Lag (NARDL) Model

Asymmetric Price Adjustments in the Shanghai Containerized Freight Index (SCFI): Evidence from a Non-Linear Autoregressive Distributed Lag (NARDL) Model

Asymmetric price transmission: Evidence from pulse markets of India

Asymmetric price transmission: Evidence from pulse markets of India

쌀 가격의 유통단계별 인과성과 비대칭적 가격 전이 검정

This study empirically analyzes the asymmetric price transfer of rice under the assumption that the degree of price response in the production stage could be reduced or expanded without being constantly transferred to the wholesale or retail stage due to costs and processing occurring in the distribution process. we first analysis the causality of the wholesale price and retail price of rice, and determine the time lag in which the price of rice is transferred from the wholesale market to the retail market. In addition, we analyze asymmetric price transmission to determine whether the rice distribution market is inefficient. In the result, the time lag is estimated to be about 10 to 30 days. Furthermore, the analysis result shows that there is positive asymmetric price transmission in the wholesale-retail market. This result can be interpreted as a high probability of a retailer''s excess profit, meaning that changes in retail prices are more sensitive when wholesale prices increase than when the wholesale prices decreases. These results suggest that improvement of the rice distribution system needs to be approached not only at the production-wholesale stage but also at the retail-wholesale stage. In other words, if an efficient retail price is determined through strengthening monitoring system of retail prices, we can expect that the more efficient distribution structure in rice market.

Price transmission between oil and gasoline and diesel: A new measure for evaluating time asymmetries

One of the most widely debated issues concerning asymmetric price transmission between oil and fuel prices is what is known as the “rockets and feathers” phenomenon. Although theoretical debate on the short-term connection between oil prices and petroleum product prices takes into account the speed and the magnitude of response, a literature review shows that empirical applications have centred their attention on the latter. This article contributes to the discussion introducing a new measure to quantify mean lag responses to positive and negative oil price shocks from asymmetric dynamic multipliers from a non-linear autoregressive distributed lag (NARDL) model that analyses weekly data from 2009 to 2020 for 12 OECD countries. The results show that both asymmetries, in terms of speed and magnitude, exist for many of the analysed markets, demonstrating the importance of not only accounting for the impact but also for the mean lag of the response.

Price extremes and asymmetric dependence structures in stock returns: the emerging market evidence

PurposeEquity research in experimental psychology reveals investors' overreactions to bad news events. This study of asymmetric price structures in equity markets investigates whether such behavior predicts stock returns in an emerging market of India.Design/methodology/approachThe research decomposes Bombay Stock Exchange (BSE) Sensex returns into Extremely Positive Returns (EPR) and Extremely Negative Returns (ENR) based on extreme values at first and then tests their lead–lag relations.FindingsThe empirical finding is consistent with the existing evidence of asymmetric news effects on stock returns in India. In precise, ENR robustly predicts one-month-ahead EPR for the sample period from January 1991 to March 2020. This predictive power persists even in the presence of popular valuation ratios and business cycle variables.Practical implicationsThe paper explains the rationale of extreme value modeling in price forecasting. Investors can find additional utility gains from market cycle information while predicting extreme returns in Indian stock market.Originality/valueThe paper is unique to understand business cycle effects in extreme return reversals in emerging markets.