Measuring abnormal pricing – an alternative approach: The case of US banana trade with Latin American and Caribbean Countries
Abstract
Purpose
The purpose of this study is to examine the degree of trade mispricing in the US fresh banana trade with Latin American and Caribbean countries using a new alternative measure in estimating arm’s length price.
Design/methodology/approach
A key feature of the research design is that we use the actual free market price of commodity (e.g. fresh banana price) as a benchmark for arm’s length price rather than relying on interquartile range, which is known to be problematic.
Findings
The paper finds that when the degree of mispricing is measured by two widely used methods, interquartile price filter and partner-country methods, we find little evidence of undervaluation or overvaluation of US banana import. However, when we use the free-market price of fresh banana as a benchmark for arm’s length price, first adopted in this study, the average undervalued amount of trade compared to the total banana import declared value by the US importers is on average 54 per cent during the period between 2000 and 2009.
Originality/value
This study suggests a new simple measure in estimating arm’s length traction price in studying trade mispricing.
Keywords
Acknowledgements
The authors benefited from the comments of the participants at the presentation of an earlier draft at the 7th International Critical Management Studies Conference, Critical Accounting Stream, University of Naples Federico II, Naples, Italy. July 11-13, 2011, and wish to express their appreciation to the participants.
Citation
Hong, K., H. Pak, C. and J. Pak, S. (2014), "Measuring abnormal pricing – an alternative approach: The case of US banana trade with Latin American and Caribbean Countries", Journal of Money Laundering Control, Vol. 17 No. 2, pp. 203-218. https://doi.org/10.1108/JMLC-11-2013-0043
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited