Abstract

Background: Onion markets in Karnataka have experienced significant price volatility in recent years, necessitating an examination of market integration across regional markets to understand price transmission mechanisms and validate the law of one price across different trading centers. Aims: This study aimed to examine the market integration of onion wholesale prices across six regional markets in Karnataka during 2004-2023 and assess whether these markets shared a common linear deterministic trend and long-run equilibrium relationships. Materials and Methods: Monthly wholesale price data from six Karnataka markets were analyzed using Augmented Dickey-Fuller test for stationarity, Johansen cointegration test for long-run relationships, and Granger causality test for price transmission dynamics. The analysis employed both Trace and Maximum Eigenvalue statistics to confirm co-integration relationships. Results: The Trace and Maximum Eigen-value statistics confirmed long-run equilibrium relationships among onion prices across all Karnataka markets studied. Granger causality analysis revealed bi-directional causality between multiple market pairs: Hubballi-Belagavi, Hubballi-Vijayapur, Hubballi-Kolar, Hubballi-Tumakuru, Belagavi-Vijayapur, Belagavi-Kolar, Belagavi-Tumakuru, and Mysore-Tumakuru. Hubballi emerged as the dominant price-determining market, followed by Belagavi. Conclusion: The onion markets in Karnataka demonstrate significant market integration with established long-run equilibrium relationships, validating the law of one price across the regional markets studied during the 2004-2023 period. Key Message: Strengthening market integration through improved infrastructure development and enhanced market information systems is essential to ensure price stability and support sustainable agricultural development in Karnataka’s onion marketing sector.

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