Introduction: In general, domestic and foreign evidence shows that price transmission in agricultural markets is often asymmetric; market expectations and behavior often cause price increases to be transmitted more quickly and strongly, while price decreases are occurred by delays or resistance. Market structure (competitive or monopolistic), product characteristics (perishable or durable), and economic conditions (inflation, sanctions, supply shocks) are among the main factors shaping this asymmetry. In centralized structures, asymmetric transmission occurs less frequently, and the dominant role of processors can make the farm-retail price relationship symmetrical. Therefore, the asymmetry in the transfer of prices from one market level to another, by affecting the market margin, sometimes allocates appreciable profits to marketing intermediaries and, by reducing the welfare of producers and consumers, has a negative effect on the efficiency of the product marketing system. Therefore, awareness of the relationship between producer and consumer prices is important both economically and politically. A clear example of this asymmetry can be seen in Iranian onion market. The onion market faces price fluctuations throughout the year due to the nature of production and storage and the synchronism of supply and demand. The onion product faces a price drop during the harvest season and its price increases mainly in the winter after the harvest season. Since this product is produced only in some seasons of the year but is consumed all year round, the supply and demand conditions are naturally unbalanced. This feature has caused its price transfer to occur asymmetrically at different levels of the market. Over recent years, the range of price fluctuations in the market for this product has increased. Therefore, considering the significant increase in the price of this product as well as the high share of this product in Iranian household consumption basket, conducting a study on the status of price transmission between different levels and the role of each link in the chain (production, wholesale, retail) seemed necessary.
Materials and Methods: This study aimed at investigating the degree of market integration and the behavior of intermediaries in response to price shocks, employing weekly data during 2019-2023 and a Nonlinear Autoregressive Distributed Lags (NARDL) framework. In order to identify the mechanism of onion price transmission between different market levels in Tehran, Granger causality test was used. In addition, to investigate the nonlinear effect of on-farm price changes and incremental (positive) and decremental (negative) shocks on retail prices, NARDL model was applied.
Results and Discussion: The empirical results revealed that the on-farm prices exerted a leading influence on price transmission, which was both asymmetric and nonlinear: upward price adjustments were transmitted more rapidly, whereas downward adjustments occurred with delay and faced resistance from intermediaries. Retail prices exhibited strong persistence, with approximately 21.3 percent of long-run disequilibrium corrected in each period, implying that market equilibrium was restored within an average of 4.5 weeks.
Conclusion and Suggestions: Policy implications highlighted the importance of enhancing input productivity and reducing production costs, fostering cooperatives and direct contracting with retailers, and expanding direct marketing channels. Therefore, regular dissemination of price information and consumer awareness initiatives are recommended to mitigate the adverse effects of concentrated market power. Furthermore, enforcing antitrust regulations, monitoring intermediary practices, implementing online platforms for transparent reporting of prices and trading volumes, and preventing artificial supply restrictions are proposed to reduce volatility and promote greater fairness across Iran’s onion supply chain.