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

This paper proposes a new method to break up the bid-ask spread in wholesale rice markets into its three components and applies the methodology to twelve major rice centers in India. The proposed methodology is claimed to be superior to the extant methods such as those of Stoll (1989) and George, Kaul and Nimalendran (1991). The split up of the spread into its components allows us to make several comments about the behaviour of grain markets in India, the efficacy of the public distribution system (PDS) and several other policy issues.