Examining asymmetric price transmission and market power in Iranian pistachio process market using a mixture approach

Asymmetric price transmission may indicate market power exerted by production firms. Regarding the issue a mixture model has been applied to analysis the price transmission pattern between processing and retailer markets of pistachio while market power is considered as well. The analysis is based on seasonal data covering 1995-2013. In line with the study objective, retailer price of pistachio was examined using two regimes of price changes, having high conformity with agricultural products nature that are characterized with mass supply in harvesting season. Inverse supply elasticity of output was used as market power parameter. Regarding the second regimethat is more likely to happen, marketing agents in wholesale market are inclined to transmit increased prices to retailer market more significantly than decreased prices. Under this regime asymmetric price transmission and market power was confirmed. The first regime with probability of 20 percent showed a lower market power, having more concordance with mass supply seasons in which small firms serve as output suppliers. These firms act as fringes,resulting in more competitive market structure.