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Do inventories have an impact on price transmission? Evidence from the Canadian chicken industry

Author

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  • Abbassi, Abdessalem
  • Tamini, Lota D.
  • Gervais, Jean-Philippe
Abstract
This paper investigates the influence of inventories in explaining the magnitude of price transmission. The empirical strategy consists of two distinct steps. First, the flexible non-linear framework of Hamilton is used to investigate the influence of inventories on price transmission. The procedure detects significant non-linearities and suggests that the price transmission elasticity is increasing in the level of the farm price and decreasing in the ratio of inventories to sales. This evidence leads to specific functional forms for the price transmission and target inventory equations which are estimated in a second step. The estimation procedure accounts for potential simultaneity between sales at the wholesale level and the wholesale price. Our results suggest that price transmission is lower (higher) when inventories are below (above) a target which is function of domestic sales.

Suggested Citation

  • Abbassi, Abdessalem & Tamini, Lota D. & Gervais, Jean-Philippe, 2011. "Do inventories have an impact on price transmission? Evidence from the Canadian chicken industry," MPRA Paper 30868, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:30868
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    Cited by:

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    2. Dembele, Alou & Özçelik, Ahmet & Ouedraogo, Ernest & Diakite, Lamissa, 2020. "Intermediaries And Asymmetric Pricing. Evidence From The Market Of Local Millet In Mali," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 23(1), March.
    3. Santeramo, Fabio Gaetano & von Cramon-Taubadel, Stephan, 2016. "On perishability and Vertical Price Transmission: empirical evidences from Italy," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(2), September.
    4. Patrick L. Hatzenbuehler & Xiaoxue Du & Kathleen Painter, 2021. "Price transmission with sparse market information: The case of United States chickpeas," Agribusiness, John Wiley & Sons, Ltd., vol. 37(3), pages 665-682, July.

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    More about this item

    Keywords

    Asymmetric price transmission; inventories;

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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