Journal Article

Trade Costs and Deviations from the Law of One Price

J. Chami Batista and G. B. da Silveira Filho

in American Journal of Agricultural Economics

Volume 92, issue 4, pages 1011-1023
Published in print July 2010 | ISSN: 0002-9092
Published online July 2010 | e-ISSN: 1467-8276 | DOI: https://dx.doi.org/10.1093/ajae/aaq044
Trade Costs and Deviations from the Law of One Price

More Like This

Show all results sharing these subjects:

  • International Trade
  • Single Equation Models; Single Variables
  • Macroeconomic Aspects of International Trade and Finance
  • Market Structure and Pricing

GO

Show Summary Details

Preview

The link between relative prices across countries and trade costs requires a theoretical foundation that is absent in the literature to date. Empirical tests on the law of one price are based on an arbitrage equation, which is of very limited relevance in understanding this link. The application of a new set of arbitrage equations to the tin trade market yields results that are consistent with our theoretical expectations. We find evidence in favor of the law of one price between the United States and Japan. However, evidence of price discrimination is also found for the Los Angeles market.

Keywords: arbitrage; commodity markets; law of one price; market power; trade costs; C21; C22; D40; F10; F41

Journal Article.  8495 words.  Illustrated.

Subjects: International Trade ; Single Equation Models; Single Variables ; Macroeconomic Aspects of International Trade and Finance ; Market Structure and Pricing

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content. subscribe or login to access all content.