Price formation at the Palmerston North fresh vegetable auction market : a thesis presented in partial fulfilment of the requirements for the degree of Master of Horticultural Science in Horticultural Economics and Marketing at Massey University
The aim was to analyse the short term price fluctuation of fresh vegetables at the Palmerston North auction market. A brief review of the theoretical and methodological aspects in relation to this topic is outlined. An econometric recursive model was developed in the "inductive phase" to represent the past behaviour of the industry. The simulation model was developed in the "deductive phase" for testing the sensitivity of the model and policy assessment. The results indicated that: 1) The wholesale demand for cabbages and cauliflowers is relatively inelastic (-0.5034 and -0.8142 respectively) while that of lettuces (-1.434) was elastic. Carrots showed nonsignificant positive relationship between quantity purchased and price (+1.935). 2) The simulation model was relatively insensitive to changes in its parameters. It was proved that the supply of fresh vegetables was mainly governed by the seasonal factor. 3) The policy of supply rationalisation could reduce price variance and supply variance by 18% and 45% respectively, while the gross income and unweighted mean price could be increased by 8.7% and 0.3% respectively.