Abstract

The present research used monthly time series data to investigate market integration of banana in India. Empirically, it was observed that the Law of One Price (LOP) was moderate in the horizontal integrated wholesale markets and robust in the retail markets. However, the LOP was found efficient in all the vertical integrated markets. Both from the horizontal and vertical dimension, Mumbai market was found to be the most efficient as they respond to price news in correcting their disequilibrium which arises from any of the short-run equilibrium. In the event of any innovation (bad-news or good-news), almost all the markets will be price follower in the banana market in India. Furthermore, banana trade is found to be very useful in all the selected markets as the volatility pattern is not explosive and Chennai market was the most efficient in price discovery. Lastly, future prices of banana in the selected markets will remain fair if well monitored in such a way that none of the participants in the marketing channel of banana will be better-off nay worse-off. Therefore, for the overall marketing efficiency, more resources should be allocated to those markets with a high degree of integration and market efficiency.