Market integration and demand for prawns in Australia

© 2019 MRE Foundation, Inc. All rights reserved. While prawns are produced domestically, most prawns currently consumed in Australia are imported from Asia. Local producers are concerned that these imports are depressing prices for their product, and future growth in imports due to increased global supplies would reduce their viability. We examined the price integration of prawn products within the Australian market using the autoregressive distributed lag (ARDL) bounds testing method. A Dynamic Inverse Almost Ideal Demand System (IAIDS) was employed to derive own-and cross-price flexibilities and scale flexibilities for the three prawn categories to determine whether the supply of one prawn product had an impact on the price of the other prawn products. The results suggest there is no price integration between domestically produced prawns (wild-caught and aquaculture) and imported prawns, but strong price integration exists between domestically produced prawns. The findings of the demand analysis confirm this result.