Price Transmission and Price Integration in Food Retail Markets: The Case of Kinshasa

Integration of commodity markets in developing countries has received considerable attention because price integration is perceived to be central to the success of food and agricultural policies. Price integration tests are performed in retail markets in Kinshasa (Zaire), i.e. between commodities, among retail markets, and between the wholesale and retail market level. Price transmission is measured by incorporating the co-integration concept into the classical long-run and shon-run market integration test. It is shown that although wholesale prices are input prices for retailers, they lack shon-run integration with retail prices. Differences exist between retail markets which do not reflect services or transponation costs. It is hypothesized that this is due to the existence ofsignificant transactions costs and deficiencies in information transmission.