Understanding the wholesale tuna market in Japan through
inverse demand modeling
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The consumption of the fresh and frozen tuna products in Japan dominates the consumption of all other countries, whereas the high prices paid for such a dominant position provide an economic incentive that drives tuna fisheries and cultivation across the globe. It is, therefore, of utmost importance to understand the confluence of factors involved in the price formation on the Japanese wholesale tuna markets. To that end, we analyzed ten years of monthly trading data for 13 different tuna products traded on the Tsukiji wholesale market in Tokyo. The results indicate that the quantities of available fish are by far the most relevant factor in the process of price formation, leaving very little space for other factors to influence the monthly prices. The interaction intensity between different product categories is high, further suggesting that the substitution of one product with other compatible products readily takes place. The goodness of fit achieved using a generalized synthetic inverse demand (GSID) system is very high within sample. Nonetheless, we discuss some characteristics of the trading data in order to highlight the reasons why good performance within sample may not translate into particularly impressive predictive capability out of sample. |
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