Components of the Wholesale Bid-Ask Spread and the Structure of Grain Markets: The Case of Rice in India

32 Pages Posted: 7 Nov 2012

See all articles by Raghbendra Jha

Raghbendra Jha

Indira Gandhi Institute of Development Research (IGIDR)

K. V. Bhanu Murthy

University of Delhi - School of Economics - Commerce Department; Delhi Technological University

Hari K. Nagarajan

Indian Institute of Management Bangalore

Ashok Seth

University of Delhi

Date Written: January 30, 1998

Abstract

In this paper we propose a new method of splitting up the Bid-Ask Spread of the wholesalers in grain markets into its three constituent components: the order processing costs, the adverse information cost and the inventory holding cost. It is argued that the extant methods of splitting up this spread are peculiar to stock markets and cannot be applied to grain markets. The proposed method is shown to be more general than the extant approaches. This new method is used to examine the constituents of the bid-ask spread in the grain markets of twelve major centers in India. The results are then linked to the production and consumption patterns in these centers.

Suggested Citation

Jha, Raghbendra and Murthy, K. V. Bhanu and Nagarajan, Hari K. and Seth, Ashok, Components of the Wholesale Bid-Ask Spread and the Structure of Grain Markets: The Case of Rice in India (January 30, 1998). IIM Bangalore Research Paper No. 106, Available at SSRN: https://ssrn.com/abstract=2170288 or http://dx.doi.org/10.2139/ssrn.2170288

Raghbendra Jha

Indira Gandhi Institute of Development Research (IGIDR) ( email )

Gen A.K. Vaidya Marg Santoshnagar
Goregaon (East)
Mumbai, Maharashtra 400065
India

K. V. Bhanu Murthy

University of Delhi - School of Economics - Commerce Department ( email )

59 Vaishali Enclave
Pitampura
Delhi, 110034
India
+91 11 27667891 (Phone)

Delhi Technological University ( email )

Delhi
India

Hari K. Nagarajan (Contact Author)

Indian Institute of Management Bangalore ( email )

Bannerghatta Road
Bangalore 560 076, Karnataka
+91-80-6582450 (Phone)

Ashok Seth

University of Delhi

University Road
Kirti Nagar
Delhi, DE New Delhi 110 007
India

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