A NECESSARY CONDITION FOR MARKET INTEGRATION TESTS: THE CASES OF THE U.S. BROILER INDUSTRY

Most studies on price relationships in spatial markets assume that perfect information is a public good. However, during the last two decades, the food industry in the U.S. has experienced a dramatic structural change, as have the structures of commodity markets; this is especially the case in the broiler industry. Tests for the presence of market integration are conducted within the framework of Neo-classical theory of the firm. Grower costs and transportation in five southern U.S. broiler states (AL, AR, GA, MS, NC) are considered in deriving necessary conditions before any conclusion on market integration is reached. Using both parametric and nonparametric tests, this study found that all price pairs have a long-run price relationship and markets are therefore integrated.