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We examine spatial integration in US corn markets using a nonlinear generalized additive model that incorporates lagged oil prices and price differentials. Six regional markets are compared to a central market using over 30 years of monthly data. All markets show strong linkages to the central market, with significant nonlinearities in most cases. The results highlight the crucial role of fuel prices in spatial linkages for markets along the Mississippi River. Rising fuel prices inhibit trade, with more pronounced effects downstream. Conversely, oil prices have less impact on markets located closer to the central market and farther from the river. [ABSTRACT FROM AUTHOR]

This paper studies the widespread price dispersion of homogeneous products across different online platforms, even when consumers can easily access price information from comparison websites. We collect data for the 200 most popular hotels in London (UK) and document that prices vary widely across booking sites while making reservations for a hotel room. Additionally, we find that prices listed across different platforms tend to converge as the booking date gets closer to the date of stay. However, the price dispersion persists until the date of stay, implying that the law of one price does not hold. We present a simple theoretical model to explain this and show that in the presence of aggregate demand uncertainty and capacity constraints, price dispersion could exist even when products are homogeneous, consumers are homogeneous, all agents have perfect information about the market structure, and consumers face no search costs to acquire information about the products. Our theoretical intuition and robust empirical evidence provide additional insights into price dispersion across online platforms in different institutional settings. Our study complements the existing literature that relies on consumer search costs to explain the price dispersion phenomenon. [ABSTRACT FROM AUTHOR]

Our study examines the integration of food markets in West African Economic and Monetary Union (WAEMU) and assesses the role of bilateral trade. In this study, we hypothesize that each country has a market. We adopted the framework borrowed from Ravallion using a dynamic panel model. The theoretical approach used is the law of one price. The main conclusion is that food markets are segmented in the short term and there is a possibility that they will be integrated in the long term. Furthermore, even if trade development tends to reduce the gap in food prices between countries, this reduction is not significant.

This paper examines the impact of trade sanctions, imposed against large exporting nations, on the degree of spatial integration achieved between non‐sanctioned importing markets. The analysis is conducted under a parity bounds framework based on Negassa and Myers (American Journal of Agricultural Economics, 89, 2007, 338). We apply this model to investigate the effects of the 2012–2016 sanctions against Iran's petrochemical exports on the main importing markets in Asia and we use it to measure the degrees of spatial integration attained outside and during the sanction period. Our findings document a complete reconfiguration of the spatial extent of the methanol markets. Outside of the sanction period, a high degree of market integration was achieved among the main Asian markets. In contrast, we observe the emergence of two little integrated market areas, China and India on one side and South Korea and South‐East Asia on the other, when sanctions are imposed. [ABSTRACT FROM AUTHOR]

Our study examines the integration of food markets in West African Economic and Monetary Union (WAEMU) and assesses the role of bilateral trade. In this study, we hypothesize that each country has a market. We adopted the framework borrowed from Ravallion using a dynamic panel model. The theoretical approach used is the law of one price. The main conclusion is that food markets are segmented in the short term and there is a possibility that they will be integrated in the long term. Furthermore, even if trade development tends to reduce the gap in food prices between countries, this reduction is not significant. Impact statement: In this study, we ask a fundamental question: is there a co-movement of food prices in the West African Economic and Monetary Union (UEMOA)? The appropriate theoretical framework to answer such a question is the law of one price. We therefore analyze the integration of food markets in West Africa by highlighting the role that bilateral trade can play. The importance of our study lies on three levels. First, we draw the attention of state and non-state actors to the need to put in place policies to facilitate better integration of food markets in the short term. This could include improving transport and communications infrastructure, and reducing non-tariff barriers. Second, by showing that long-term integration possibilities exist, we encourage the pursuit of cooperation and food market development strategies. Third, we reveal that the bilateral trade necessary to equalize food prices between countries is not yet achieved in the WAEMU. [ABSTRACT FROM AUTHOR]

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The objective of this study is to judge whether Japanese sweet potatoes are differentiated in the Hong Kong and Singapore imported sweet potato market, where most Japanese sweet potatoes are exported to. The methods used in this study are generalized composite commodity theorem and the law of one price in terms of horizontal price transmission between imported sweet potatoes from several countries in the two countries above. The results suggest that Japanese sweet potatoes are differentiated in Hong Kong. However, it is not the case with Singapore. [ABSTRACT FROM AUTHOR]

Decentralized cryptocurrencies are characterized by decentralized trading taking place concurrently at multiple exchanges. Price deviations in two major cryptocurrencies are investigated across six major cryptoexchanges. Trading in both bitcoin and ethereum has become more integrated across different cryptoexchanges since 2018. Bitcoin and ethereum spot many similarities in the behavior of price deviations for any given pair of exchanges and share similar trading dynamics on the same cryptoexchange. Returns on arbitrage trading of bitcoin and of ethereum exhibit very similar dynamics and properties across different cryptoexchanges, as well as over time. Profitable opportunities for arbitrage trading of either cryptocurrency across different cryptoexchanges have declined significantly since 2018. An introduction of a financial derivative traded at a regulated exchange that allows to benefit from decline in the price of bitcoin is found to have a significant impact on the dynamics of trading of both bitcoin and ethereum in the respective decentralized spot markets. [ABSTRACT FROM AUTHOR]

Are food prices more or less equalised across countries? In view of various barriers to trade (both naturally occurring and of a man-made nature) and currency gyrations, the answer would seem to be an unambiguous "No", but we show this question is worthy of further investigation. In order for the law of one price (LOP) to hold, domestic prices must respond one-for-one to changes in world prices and exchange rates, but this is usually prevented by variations in mark-ups and/or trade barriers. We use data on producer prices from the Food and Agriculture Organization to test for the LOP. The results give surprising support to the LOP: Market wedges appear to be insufficiently important to prevent food prices equalising over the longer term. The law of one food price seems to hold, at least as a first approximation. [ABSTRACT FROM AUTHOR]

This study investigated the factors causing differences in the prices of MNC operating in different countries that affect the pricing in different regions and deviating from the law of one price and influencing factors by comparing prices of both India and Pakistan being developing countries. The study focused on some specific variables such as GDP, exchange rate, purchasing power parity, and price in the dollar that have been analyzed from January 2016 to January 2021 based on biannual data. The quantitative approach has been applied and the study is based on secondary data, Statistics are taken from the “Big Mac Index” which is used as a benchmark for the comparison of the prices to have a deep insight about prices. The product taken for comparison between 2 countries is “The Big Mac” which is a product of McDonald’s (A multinational corporation) that operates more than 36,000 restaurants in more than 100 countries around the world. The tool used for the analysis of the collected data is Microfit software. Results show currency value, Dollar exchange, and Dollar GDP is statistically not significant, in the case of India analysis shows that dollar exchange, dollar GDP, and dollar PPP having values 0.047, 0.004, and 0.011 respectively are significant and currency value 0.458 & dollar price 0.11 are not significant.

We analyze a new price mechanism to deviate from the Law of One Price. If stores differ in the varieties offered in a given product category, prices diverge more often regardless of distance. A simple extension to Hotelling (1929) explains this result. We test our prediction using a unique country-level detailed price database. To have one difference in variety in a product category between two stores increases the price difference by 0.6–0.8%. The store characteristics explain nearly half of the effect, which partially account for the selection of varieties. This result is robust to several controls and alternative specifications and increases as the distance between stores decreases. We offer causal evidence of the varieties-to-prices channel by exploiting an exogenous shock to store demand that changes the relative number of varieties. The results of the causal effect are in line with the baseline estimations. Our results show that store decisions on variety selection could have a significant aggregate impact on price volatility. [ABSTRACT FROM AUTHOR]

Horizontal (vertical) elasticities of price transmission in a competitive market can be positive or negative in sign depending on whether observed changes in market prices are triggered by shifts in the supply or demand for the commodity or by changes in trade (marketing) costs. These facts suggest estimates of horizontal (vertical) elasticities of price transmission obtained from empirical models that exclude trade (marketing) costs will suffer from attenuation bias. The attenuation bias is apt to cause inferences about market efficiency to be more pessimistic than is warranted. [ABSTRACT FROM AUTHOR]

Suppliers of agricultural output incur switching costs (SCs) when choosing new buyers, allowing buyers to exercise oligopsonistic market power, as SCs help buyers to mark down prices for incumbent suppliers. This article conceptualizes the idea of SCs and suggests an empirical strategy for quantifying them through an estimation of farm supply to specific buyers. The model incorporates price differences between buyers, revealing buyers' anticipations of suppliers' SCs. The approach is applied to the Indonesian rubber market, employing a data set of daily purchasing prices and less frequent quantities of individual sales instances. Results indicate that SCs exist and are at about 3% of the farm gate price, leading to substantial redistribution from suppliers to buyers of agricultural output. [ABSTRACT FROM AUTHOR]

Australia has experienced a significant increase in seafood imports over the past two decades. Concurrently, Australian seafood producers have raised concerns that the low market prices of imported fish may negatively affect the prices of domestically produced seafood and, subsequently, the profitability of the Australian fishing industries. To validate this concern, this study examines the relationship between prices of domestically produced seafood and imported fish. Price data from the Sydney Fish Market (SFM), Australia's largest auction wholesale fish market and fish import data are used for a cointegration analysis which is conducted using the bivariate Johansen test. Results indicate that prices of most domestic species traded within the SFM are not cointegrated, implying that they largely develop independently of each other. However, imported fish, particularly fresh imports, were found to be cointegrated with Australian produced fresh fish supplies traded on the SFM. Although the law of one price (LOP) was only confirmed to hold for some price pairs, the results suggest a partial substitution relationship between imports and domestically caught fish. This implies that prices of domestically produced fish within the Australian market are likely impacted by price dynamics within the international seafood market. [ABSTRACT FROM AUTHOR]

This paper studies the integration of regional goods markets in Russia over the period 2001–19, analysing the law of one price. The analysis involves all pairs of country's regions, which provides a comprehensive spatial pattern of market integration. The region pairs are classified as belonging to one of four groups: perfectly integrated, conditionally integrated, not integrated but tending towards integration (converging), and neither integrated nor tending towards integration. On average, a region is found to be perfectly and conditionally integrated with 48.7% of other regions and tending towards integration with 3.3% of them. Comparisons of the European and Asian parts of Russia and other considerations suggest that geographical reasons explain the pattern obtained only partially. Apparently, idiosyncratic features of regional markets play a main role in non-integration. [ABSTRACT FROM AUTHOR]

We develop fully flexible, semi-parametric models of price linkages in spatially distinct regional US markets for plywood and lumber products. The models are developed within the framework of generalized additive models (GAM) which are estimated using penalized maximum likelihood estimation methods and generalized cross-validation techniques. Such nonlinear models are a natural extension to an extensive literature that has developed increasingly flexible models of the Law of One Price and spatial market integration. The GAM estimates and marginal responses to price changes exhibit substantial nonlinearities. Dynamic impulse responses demonstrate significant asymmetries in price responses to exogenous shocks. The results are largely consistent with efficiently linked regional markets for lumber and plywood products in that price transmission elasticities are generally close to unity and localized market shocks evoke equilibrating adjustments in regional markets. [ABSTRACT FROM AUTHOR]

Using retail commodity prices, most research finds positive Border Effects and rejects effective arbitrage and the Law of One Price. On the other hand, using auction prices, the finance literature and a few articles using commodities support effective arbitrage and the LOP. Using longer intervals and a wider variety of commodity auction prices than ever before, I find strong support for effective arbitrage and the LOP. In addition, for the first time, I use auction prices to look for Border Effects. Both half lives and standard deviations reject positive Border Effects.

Globalization is a complex phenomenon, best represented by a general framework in which all financial markets and some goods markets adjust quickly, while for the other goods markets prices vary across countries. We consider a two-period financial model. In the first period, agents consume, buy and sell financial assets to diversify their portfolios. In the second period, they spend their endowments and financial gains to purchase consumption goods. We define the concept equilibrium*, in which the total nominal value of trade is balanced and, for any non-negative individualized system of prices, the total nominal value of demand does not exceed the total value of supply. This equilibrium* coincides with the standard concept of equilibrium when the Law of One Price (LOP) is satisfied for any country. In this model, we introduce imperfect international trade. Assuming that Uncovered Interest (rate) Parity (UIP) holds in all financial markets and the LOP does not hold in some goods markets, we prove that an equilibrium* does exist; for markets in which the LOP fails, however, the equilibrium becomes autarkic. This result explains why financial markets and some goods markets are globally integrated, while trade fails in other markets. The world economy is fully globalized only if the LOP holds everywhere. [ABSTRACT FROM AUTHOR]

We consider an arbitrage strategy that exactly replicates the cash flow of a sovereign nominal bond using inflation swaps and inflation‐linked bonds. The strategy reveals a violation of the law of one price in the G7 countries, which is largest for the eurozone. Testing the strategy's exposure to deflation, volatility, liquidity, and macro‐economic risks shows the observed mispricing is a risk premium, which is more pronounced in the eurozone. We find less support that financial limits to arbitrage explain the mispricing. We conclude that pure long‐run arbitrage opportunities persist when these strategies are exposed to intermediate financial risks. [ABSTRACT FROM AUTHOR]