Market micro structure and price formation: the case of onion trades in Azadpur Mandi
Student name: Ms Anisha Kothari
Guide: Dr Debdatta Saha and Mr.Soumendu Sarkar
Year of completion: 2014
Host Organisation: South Asian University, New Delhi & TERI University
Abstract: This paper analyzes the market micro structure and price formation of onion market. It also
shows possible reasons for collusion, price manipulation and asymmetric price transmission.
In particular we analyze price transmission using vector autoregressive model. Results show
that price formation happens at Pimpalgaon and it sends signal to Azadpur which in turn
sends signal to Alwar. A theoretical model is developed to show that if there is a negative
quantity shock at Pimpalgaon then it is incentive compatible for the traders to collude.
Key Words : Supply Shock, Market Power, Collusion, Asymmetric Price Tranmission
