Single Versus Multi-market Approach: An Application to the Greek Cotton Market |
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Authors: | Dimitrios Dadakas Stelios D. Katranidis |
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Affiliation: | (1) University of Macedonia, 156 Egnatia Str., P.O. Box 1591, Thessaloniki, 540-06, Greece |
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Abstract: | Estimation of the price-induced welfare effects in vertical and horizontal market settings may prove a tricky task when multiple price changes are taken into account. Whether a multi-market sequential approach or a single-market approach is used the well-established, theoretical result suggests that these two partial equilibrium methods are equivalent in terms of implied welfare changes. This paper develops the methodology to empirically compare these two methods. We estimate the welfare changes to Greek cotton–yarn producers induced by the simultaneous change in the prices of cotton–yarn and the cost of labor. Results substantiate the multi-market approach offers more accurate welfare estimates than the single-market approach, in empirical work. |
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Keywords: | Welfare Multi-market Sequential Single-market Bootstrap |
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