Study Conducted by Fair Trading Commission Jamaica
An Economic Enquiry into the Causes of the Perceived Asymmetric Price Transmission in Markets for Specific Consumer Goods in Jamaica
April 2009
Prepared by
The Fair Trading Commission (FTC) of Jamaica
Research Team
Tom Amonde, Ph.D., Competition Analyst (author)
Lyndel McDonald, Research Officer (research assistant)
Kristina Barrett, Research Officer (research assistant)
Contact Information
52-60 Grenada Crescent, Kingston 5, Jamaica, West Indies
Tel: +1.876.960.0120
Fax: +1.876.960.0763
Email: ftc@cwjamaica.com
Website: http://www.jftc.com/
Abstract
The objective of this study is to enhance our understanding of the pricing mechanism in the food distribution industry in Jamaica. The study became relevant because of the general public perception that prices of food items in Jamaica rise faster than they fall - a phenomenon which often is referred to as asymmetric price transmission (APT) and for which economists have offered multiple alternative explanations. We explore whether and the extent to which the pricing strategies employed in the distributive trade in Jamaica are consistent with the four explanations which have been most prominently researched. To accomplish this, we rely on mainly the opinion of businesses operating at various segments (i.e. importation, production, distribution, wholesale and retail) of the distributive trade. We also utilised price data collected at the wholesale and retail segments of the trade. Based on our analysis of the preliminary data, we conclude that APT in Jamaica may be explained by (i) anticompetitive conduct at the retail level - in the form of coordinated conduct by some retailers; and (ii) relative uncertainties in a key economic variable - in the form of instability in the foreign exchange market. These results are necessarily preliminary and, as such, more forensic analysis must be undertaken to confirm their validity.
Prepared by the Jamaica Fair Trading Commission. All Rights Reserved.
April 2009
Prepared by
The Fair Trading Commission (FTC) of Jamaica
Research Team
Tom Amonde, Ph.D., Competition Analyst (author)
Lyndel McDonald, Research Officer (research assistant)
Kristina Barrett, Research Officer (research assistant)
Contact Information
52-60 Grenada Crescent, Kingston 5, Jamaica, West Indies
Tel: +1.876.960.0120
Fax: +1.876.960.0763
Email: ftc@cwjamaica.com
Website: http://www.jftc.com/
Abstract
The objective of this study is to enhance our understanding of the pricing mechanism in the food distribution industry in Jamaica. The study became relevant because of the general public perception that prices of food items in Jamaica rise faster than they fall - a phenomenon which often is referred to as asymmetric price transmission (APT) and for which economists have offered multiple alternative explanations. We explore whether and the extent to which the pricing strategies employed in the distributive trade in Jamaica are consistent with the four explanations which have been most prominently researched. To accomplish this, we rely on mainly the opinion of businesses operating at various segments (i.e. importation, production, distribution, wholesale and retail) of the distributive trade. We also utilised price data collected at the wholesale and retail segments of the trade. Based on our analysis of the preliminary data, we conclude that APT in Jamaica may be explained by (i) anticompetitive conduct at the retail level - in the form of coordinated conduct by some retailers; and (ii) relative uncertainties in a key economic variable - in the form of instability in the foreign exchange market. These results are necessarily preliminary and, as such, more forensic analysis must be undertaken to confirm their validity.
Prepared by the Jamaica Fair Trading Commission. All Rights Reserved.