Evaluating the Law of One Price Using Micro Panel Data

Abstract

This paper investigates spatial variations in product prices using an exhaustive micro dataset on fish transactions. The data record all transactions between vessels and wholesalers that occur on local fish markets in France during the year 2007. Spatial disparities in fish prices are sizable, even after fish quality, time, seller and buyer unobserved heterogeneity have been taken into account. The price difference between local fish markets can be explained to some extent by distance, but mostly by a coast effect (analogous to a border effect in the literature on the law of one price) related to separate location on the Atlantic and Mediterranean coasts. In particular, fish and crustacean prices are 34% higher on the Mediterranean coast. The law of one price is verified for almost all species when considering only local fish markets on the Atlantic coast.

Keywords: commodity price, fish, local markets, panel data

JEL Classification: L11, Q22, R32