Markets, Strategies, and Rivalries
New Horizons in International Business series
Edited by Jens Gammelgaard and Christoph Dörrenbächer
To study the process of domestic market integration in Lao People’s Democratic Republic (hereafter Lao PDR), this chapter explores the spatial variation in beer prices and its relationship with transport costs and various local market characteristics. More specifically, we study how the price of a 640 ml bottle of Beer Lao varies across the country. In a well-integrated market, we expect the law of one price to hold. Controlling for transaction costs, a homogeneous product should have the same price throughout the market. Sellers trying to charge a higher price will find that potential buyers turn to competing suppliers. Those starting out with a lower price will meet high demand and realize that they can maximize their profit by raising their price. Well-integrated markets where price signals are rapidly transmitted across space are more efficient, since both consumers and producers are better able to adjust to changes in supply and demand conditions. In reality, however, markets are not perfectly integrated. Natural or man-made obstacles to economic interaction, such as lack of transport routes, excessive transport costs, or formal trade barriers, may block information flows and arbitrage.
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.