Studying the Law of Unit Price in Tehran's Vegetable Markets: Case Study of Tomato and Potato

The current study aimed to examine the law of one price by using the monthly data in wholesale and retail markets of potato and tomato during the period of 2010 to 2014 in Tehran. The applied techniques consist of new method of time series econometrics such as HEGY test, Johansen co-integration and vector error correction model. The result of HEGY test indicates the unit root at zero frequency. Furthermore, the Johansen co-integration test revealed the positive relationship between wholesale and retail prices in two markets. The consequence of Granger test represents the unidirectional causality from wholesale prices to the retail ones and the outcome of vector error correction model in each period suggests that 26 and 30 percent of short-run disequilibrium derived by impulse response variables are adjusted in order for tomato and potato markets. As a result, taking the necessary precautions to reduce retail price coherence of the two products to their wholesale price is suggested to the authorities due to restrain price volatilities.