Asymmetric price transmission: the case of potato and onion in Costa Rica

Abstract

In Costa Rica, the potato and onion agro-chains are of great importance in family nutrition and in the development of small and medium-sized producers in specific areas of the country. The study ofprice behavior and the way in which information is transmitted throughout the value chain represents a fundamental factor for decision-making both at the productive level and at the public policy level. The objective of this research is to analyze the process of vertical transmission of prices in the potato and onion agro-chains, as a tool to measure the efficiency in the markets. Monthly price time series were used and different modeling techniques were applied to explain the relationship between international prices, producer, wholesale and retail prices in both agricultural chains. It stands out that changes in prices are not immediately transmitted to the price paid at the farm and that the producer price reacts faster when international or wholesale prices fall than when they increase.