Most studies measuring asymmetric adjustments in
vertical price transmissions fail to provide empirical support to
explain such behavior. The literature invokes theoretical models,
which derive asymmetric behavior based on variables that are difficult
to measure such as oligopolies' coordination policies, market imperfections
or menu costs. Therefore, with no empirical support explaining the
asymmetries, these studies leave no room for policy implementation.
In this paper I relate asymmetric price responses to a theory of
behavior under risk driven by the perishable rate of the goods.
Retailers of a perishable good facing an increment in the wholesale
price may decide not to increase their prices for fear of being
left with a spoiled product. Using three agricultural products with
different perishable rates I reject the null hypothesis of symmetric
adjustments in the most perishable product but fail to reject for
the less perishable goods. The nonlinear responses are consistent
with the prediction of the model. The test for asymmetries uses
a threshold cointegration technique where the threshold level and
the cointegration vector are estimated from the data instead of
being imposed by the econometrician.
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