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Product differentiation and dynamic price behavior in fish markets.

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Abstract

The objective of this paper is to estimate the dynamics of aquaculture and fish prices as a response to price shocks. The vector autoregression approach will be used to explain the dynamics of the sea bream market in both cultured and wild fishing. The main result is that changes in public regulation or in production conditions could stimulate production responses which may take time to settle. Usually, the change is a matter of adjusting between equilibria over a period of time, with the pattern and speed of the adjustment, depending on the nature and degree of disequilibrium in the fishing system. (JEL Q10, Q20)

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Introduction

Economic relationships among aquaculture output prices and fishery prices are intertwined and complex. In particular, it is difficult to accurately determine whether the substitution or the complementary effects will be dominant in explaining the relationship between cultured and wild sea bream prices. Changes in public regulation or in production conditions could stimulate production responses that may take time to settle. Usually, the change is a matter of adjusting between equilibria over a period of time, with the pattern and speed of the adjustment depending on the nature and degree of disequilibrium in the fishing system. In this paper, the vector autoregression approach will be used [Sims, 1980] to explain the dynamics of the sea bream market in both cultured and wild fishing.

The main purpose of this paper is to estimate the dynamics of aquaculture and fish prices as a response to price shocks. The dynamics of the sea bream (Sparus Aurata) market, in both cultured and wild fishing, will be analyzed using the vector autoregression approach. This approach will be used for analyzing the dynamic impact of random disturbances on this system of variables.

Sea bream is present in the Spanish markets only as a fresh product and is always sold in whole form. The individual market size of farmed sea bream is usually around 400-500 grams. The size of wild bream used to be more heterogeneous and generally bigger than farmed fish. Small sizes are usually served whole, while bigger sizes are cooked whole but served in portions and considered more luxurious products and higher in price.

Cultured sea bream may either be imported (mainly from Greece) or local, but there are no specific characteristics that makes it distinguishable for normal consumers. The wild product mainly comes from local landings. Sea bream experienced a sustained increase of supplies from 1993-2000, with reduction in prices from 1990-1996 (achieving certain stability after 1996). The positive variation in the supply of cultured fish has not been supported by promotion campaigns. Nevertheless, its presence in the restaurant sector and fish shops is much more common today than in the mid 1990s.

This paper is organized as follows. The next section briefly discusses the data and the econometric methodology that will be used to test the price dynamic hypothesis in sea bream markets....

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