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Trade Costs and Deviations from the Law of One Price

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

Abstract

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. Copyright 2010, Oxford University Press.

Suggested Citation

  • J. Chami Batista & G. B. da Silveira Filho, 2010. "Trade Costs and Deviations from the Law of One Price," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(4), pages 1011-1023.
    • Handle: RePEc:oup:ajagec:v:92:y:2010:i:4:p:1011-1023
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    File URL: http://hdl.handle.net/10.1093/ajae/aaq044
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    Cited by:

    1. Fujin Yi & Sihan Lyu & Lu Yang, 2024. "More Power Generation, More Wheat Losses? Evidence from Wheat Productivity in North China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(4), pages 907-931, April.
    2. Jorge Chami Batista & Yan Liu, 2017. "Export Quality and the Dynamics of North–South Competition," The World Economy, Wiley Blackwell, vol. 40(1), pages 207-232, January.
    3. Stefano Mainardi, 2018. "Fishing vessel efficiency, skipper skills and hake pricetransmission in a small island economy," Review of Agricultural, Food and Environmental Studies, INRA Department of Economics, vol. 99(3-4), pages 215-251.
    4. Thomas Kopp, 2022. "When switching costs cause market power: Rubber processing in Indonesia," Agricultural Economics, International Association of Agricultural Economists, vol. 53(3), pages 481-495, May.
    5. Jorge Chami Batista & Yan Liu, 2016. "Export Quality And The Dynamics Of North-South Competition," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 108, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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