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Economics Research Institute Study Paper




Utah State University Department of Economics

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The concept of market integration and the law of one price are defined and select cattle markets are examined relative to these definitions using correlation and cointegration approaches. Utilizing data on cattle as collected by Cattle-Fax, cattle price data are analyzed to determine the extent and nature of market integration. Six cattle classes, distinguished by sex and weight, are examined over 12 market areas encompassing 19 states. All of these markets are found to be integrated, though only a portion are perfectly integrated such that the law of one price holds. The law of one price holds most often in the lightweight (400-pound) heifers and least often in the heavy (800-pound) steers. The most influential markets appear to be in the Southwest, with the least influential markets typically found in the Northwest and Mountain States. The results are invariant to the methodology used.