Marketing and Pricing Dynamics in the Presence of Structural Breaks: The Hungarian Pork Market

The study of marketing margins and price transmission on various commodity markets has been a popular research topic of the past decades (see Meyer & Von Cramon-Taubadel, 2004 Meyer , J. , & Von Cramon-Taubadel , S. ( 2004 ). Asymmetric price transmission: A survey . Journal of Agricultural Economics , 55 ( 3 ), 581 – 611 .Crossref], Web of Science ®] , Google Scholar], for a recent survey). However, with a few exception these studies focused on developed economies. This article examines this phenomena on the Hungarian pork market. The Johansen (maximum likelihood, 1988 Johansen , S. ( 1988 ). Statistical analysis of cointegrating vectors . Journal of Economic Dynamics and Control , 12 , 231 – 254 .Crossref], Web of Science ®] , Google Scholar]) or Engle and Granger (2-step, 1987 Engle , R. F. , & Granger , C. W. J. ( 1987 ). Cointegration and error correction: Representation, estimation and testing . Econometrica , 55 , 251 – 276 .Crossref], Web of Science ®] , Google Scholar]) cointegration tests do not reject the no-cointegration null hypothesis between the Hungarian pork producer and retail price series. Therefore, we applied the Gregory and Hansen (1996 Gregory , A. W. , & Hansen , B. E. ( 1996 ). Residual-based tests for cointegration in models with regime shifts . Journal of Econometrics , 70 , 99 – 126 .Crossref], Web of Science ®] , Google Scholar]) procedure with recursively estimated break points and Augmented Dickey Fuller (ADF) statistics and found that the prices are cointegrated with a structural break occurring in April 1996 Gregory , A. W. , & Hansen , B. E. ( 1996 ). Residual-based tests for cointegration in models with regime shifts . Journal of Econometrics , 70 , 99 – 126 .Crossref], Web of Science ®] , Google Scholar]. Exogeneity tests reveal the causality running from producer to retail prices both in the long and short run. Homogeneity tests are rejected, suggesting a markup pricing strategy. Price transmission modeling suggests that price transmission on the Hungarian pork meat market is symmetric in the long run but asymmetric in the short run; that is, processors, wholesalers, or retailers might take temporary advantage should price changes occur.