Quarterly Journal of International Agriculture No. 2/14
Vertical Price Transmission in the International Fresh Fruit and Vegetable Supply Chain: Israeli Grapefruit Exports to the EU after Export Liberalisation
Linde Götz
Leibniz-Institute for Agricultural Development in Transition Economies
(IAMO), Halle (Saale), Germany
Stephan von Cramon-Taubadel
Georg-August University Goettingen, Germany
Yael Kachel
The Hebrew University of Jerusalem, Israel
Abstract
We investigate competitiveness and price behaviour in the Israeli citrus export sector
following the removal of the government export monopoly and the entry of private
export companies in 1991. We identify asymmetric price transmission for some
exporters even in the liberalized market which only became symmetric when a
minimum price agreement was established by the government in the grapefruit market.
Our findings indicate that citrus growers’ seasonal losses resulting from asymmetric
price transmission amounted to as much as 4.0% of their total revenues, and a much
larger share of their profits. This result is consistent with the hypothesis that the
observed asymmetry in price transmission was caused by Israeli exporters exerting
market power over Israeli citrus growers. Concluding, our analysis demonstrates that
the liberalization of the Israeli grapefruit export market by the abolishment of the
government marketing board alone was not sufficient to establish a competitive
market. Rather, an additional temporary government market intervention was necessary
to foster competitive pricing behaviour by the exporting companies vis-à-vis the Israeli
grapefruit growers.
Keywords: international fresh fruit and vegetable supply chain, vertical price transmission, export liberalization, market power, Israel, citrus
JEL: F13, Q13, Q17, Q18
Vol. 53 (2014), No. 2: 99-120