Distinguishing between equilibrium and integration in spatial price analysis

This article introduces a new spatial price analysis methodology based oil maximum likelihood estimation of a mixture distribution model incorporating price, transfer cost and trade flow data. This method permits differentiation between market integration and competitive market equilibrium and derivation of intuitive measures of intermarket tradability, competitive market equilibrium, perfect integration, segmented equilibrium and segmented disequilibrium. One call also use these estimates to derive semiparametric measures of time-varying, regime probabilities to track changing market conditions. An application to trade in soybean meal among Pacific Rim economics demonstrates the usefulness of the method.