Asymmetry in Transaction Costs and Price Transmission: The Case of Cowpea Market in Burkina Faso

Abstract

We use a TVECM to analyze the nature of price relationship and adjustment between local markets of cowpea in Burkina Faso. First, the estimated thresholds suggest that not only transaction costs between central market and secondary markets are asymmetric but also higher for producing markets. Second, the sign and the amplitude of adjustment parameters are consistent with the spatial equilibrium even if prices respond quickly to positive shocks than negative shocks. Finally, the distribution of observations across different trade regimes suggests that markets are well performing in the sense that they display fewer violations of competitive spatial equilibrium.