Abstract

Identifying the Price Transmission Mechanism in Iran’s Shrimp Market

Price transmission across different market levels (producer, wholesale, and retail) is a key issue in analyzing the efficiency of agricultural and fisheries markets. This article examines the price transmission mechanism in Iran’s shrimp market using advanced econometric models. Research findings indicate that price transmission in Iran’s shrimp market is **incomplete** and **asymmetric**, with the speed of transmission during price increases being greater than during price decreases. Additionally, the structure of Iran’s shrimp export market is highly concentrated, with the share of the top four importing countries ranging from 73% to 96%. Based on the results, reforming the banking system, lifting sanctions, and adopting stable supportive policies are identified as the most important priorities for improving market efficiency and enhancing the competitiveness of Iranian shrimp in global markets.

1. Introduction and Significance of the Topic

Understanding how prices are transmitted across different market levels (producer, wholesale, and retail) is of strategic importance for effective policymaking in the agricultural and fisheries sectors. Price transmission refers to the process through which price changes at one market level (such as global markets or retail) are transmitted to other levels (such as wholesale markets or producer prices).

Iran’s shrimp industry—with over 48,800 tons of farmed shrimp production and approximately 12,000 tons of wild-caught marine shrimp—holds a significant position in the country’s fisheries economy. Shrimp exports in recent years have accounted for a substantial share of Iran’s total seafood exports. However, structural barriers, sanctions, and banking system inefficiencies have created serious challenges for the market efficiency of this product.

2. Theoretical Foundations of Price Transmission

2-1. Complete vs. Incomplete Price Transmission

In a competitive and efficient market, price changes at one level should be fully and proportionally transmitted to other levels. However, in practice, due to various factors—including monopolistic structures, transaction costs, government interventions, and information asymmetry—price transmission often occurs incompletely.
2-2. Symmetric vs. Asymmetric Price Transmission

Price transmission is considered asymmetric when the speed and magnitude of transmission during price increases differ from those during price decreases. The phenomenon of “price stickiness” is among the factors contributing to asymmetric transmission, particularly when price increases are transmitted to consumers more quickly than price decreases.

3. Research Findings on Iran’s Shrimp Market

3-1. Incomplete Price Transmission

A study by Baghestani and Rahimi (2016) using monthly data from 2001 to 2015 and employing a **bivariate GARCH model** examined the price transmission mechanism in Iran’s shrimp market. The results of this study indicate that:

– The **rate of change in retail prices** partially causes changes in **wholesale prices**.
– Specifically, a one-unit increase in the retail price index adds less than one unit (equivalent to 0.2 units) to the wholesale price index.
– This finding demonstrates that **price transmission in Iran’s shrimp market is incomplete**, and price signals are not fully transmitted from the retail level to the wholesale level.

3-2. Asymmetric Price Transmission

The same study, using the **Houck Method**, examined the symmetry or asymmetry of price transmission. The results indicate that:

– Price transmission in Iran’s shrimp market is **asymmetric**.
– **The speed of transmission during price increases is greater than during price decreases**.
– This phenomenon demonstrates that producers and consumers are disproportionately affected by price fluctuations, and during periods of price increases, greater pressure is exerted on downstream market segments.

**Table 1: Summary of Price Transmission Findings in Iran’s Shrimp Market**

| Indicator | Result | Source |

| Price transmission (retail to wholesale) | Incomplete (0.2 units increase per 1 unit) | |
| Price transmission symmetry | Asymmetric | |
| Transmission speed during price increases | Greater than during decreases | |

4. Structural Barriers Affecting Price Transmission

A study by Adeli et al. (2021) using questionnaires completed by 40 shrimp exporters and industry experts identified and prioritized the barriers facing Iran’s farmed shrimp market. The most important identified barriers are:

4-1. Priority Barriers (Ranks 1-3)

| Rank | Barrier | Description |

| 1 | **Inefficiency of the banking system in exports** | Restrictions on currency transfers, lack of access to international financial services |
| 2 | **Sanctions** | Restricted access to target markets and increased transaction costs |
| 3 | **Instability of appropriate supportive policies** | Frequent changes in export laws and regulations |

 Other Key Barriers

– **Weak branding and lack of an international marketing research institution**
– **Lack of marketing knowledge and a clearly defined marketing plan**
– **Uniformity in production strategy and lack of product diversification**
– **Regional competition and weak interaction with neighboring markets**

These barriers—particularly banking system inefficiency and sanctions—play a significant role in exacerbating incomplete and asymmetric price transmission by increasing transaction costs and reducing information transparency.

5. Structure of Iran’s Shrimp Export Market

Based on a study by Majidian et al. (2025), which used concentration ratio indices, the Herfindahl-Hirschman Index, Revealed Comparative Advantage (RCA), and Symmetric Revealed Comparative Advantage (SRCA) over the period 2003–2022:

5-1. Global Market Structure

– The structure of the global shrimp export market has fluctuated between **monopolistic competition** and **closed oligopoly**.
– The share of the world’s top four exporting countries during the study period ranged from **33% to 55%**.

5-2. Iran’s Export Market Structure

– The structure of Iran’s shrimp export market during the study period fluctuated between **closed oligopoly** and **dominant firm**.
– The share of the top four importing countries of Iranian shrimp during this period ranged from **73% to 96%**, indicating **high concentration of target markets** and significant export risk.

Prioritization of Target Markets (Lowest-Risk Markets)

Based on export advantage indicators, the best and lowest-risk target markets for Iranian shrimp exports are:

| Rank | Target Market | Export Advantage Score |

| 1 | Hong Kong | 421.19 |
| 2 | United Arab Emirates | 121.27 |
| 3 | Malaysia | 113.14 |
| 4 | Russia | 92.09 |
| 5 | Qatar | 77.39 |
| 6 | China | 72.70 |
| 7 | Vietnam | 45.74 |

**Strategic Recommendation:** It is suggested that exporters focus on priority countries and plan market entry by examining existing conditions in target markets, particularly consumer preferences.

6. Analysis of Findings and Policy Implications

6-1. Implications of Incomplete and Asymmetric Price Transmission

Incomplete price transmission in Iran’s shrimp market means that **retail price changes are not fully reflected in wholesale prices**. This can have multiple causes:

1. **Presence of multiple intermediaries** in the supply chain, each capturing a share of the profit margin
2. **High transaction costs** due to sanctions and banking system inefficiency
3. **Lack of information transparency** and unequal access to market information
4. **Monopolistic market structure** at various levels

On the other hand, **asymmetric price transmission** means that during periods of global or domestic price increases, the increase is transmitted more quickly to wholesale and retail prices; however, during price decreases, the reduction is transmitted with delay and at a slower speed. This phenomenon can harm consumers and reduce market efficiency.

6-2. Policy Recommendations

Based on the reviewed research findings, the most important policy recommendations are:

| Policy Area | Recommendation | Scientific Basis |

| **Non-price policies** | Adopt non-price supportive policies instead of focusing solely on pricing | Incomplete and asymmetric price transmission |
| **Banking system reform** | Facilitate access to international financial services for exporters | Most important identified barrier |
| **Sanctions relief** | Pursue diplomatic efforts to reduce trade restrictions | Second most important market barrier |
| **Stable supportive policies** | Create stability in export laws and regulations | Third most important barrier |
| **Branding strengthening** | Establish an international marketing research institution | Structural weakness in the market |
| **Target market diversification** | Focus on low-risk markets (Hong Kong, UAE, Malaysia) | Concentrated export market structure |
| **Quality standards development** | Pursue international certifications such as ASC | Increased access to European markets |
6-3. Role of International Standards

In 2025, a meeting was held in Tehran with the participation of the Dutch Embassy and representatives of the Aquaculture Stewardship Council (ASC), emphasizing the importance of obtaining ASC certification for entry into European markets. Ten Iranian experts successfully completed ASC auditing training, and two pilot farms in Qeshm and Bushehr were selected for certification. This certification can help reduce non-tariff barriers and improve price transmission through increased transparency and trust in target markets.

 Conclusion

Based on the review of conducted research, the price transmission mechanism in Iran’s shrimp market is characterized by two main features:

1. **Incomplete price transmission**: Retail price changes are not fully reflected in wholesale prices, with only 0.2 units of each 1-unit increase transmitted to the wholesale level.

2. **Asymmetric price transmission**: The speed of transmission during price increases is greater than during price decreases, indicating the presence of “price stickiness” and monopolistic structures in the market.

Structural barriers such as banking system inefficiency, sanctions, and instability of supportive policies play a significant role in exacerbating this incompleteness and asymmetry of price transmission. Furthermore, the concentrated structure of Iran’s export market (with the top four countries accounting for 73% to 96% of exports) creates significant export risk for industry participants.

**Final Recommendation:** Given the incomplete and asymmetric nature of price transmission, policymakers should focus not solely on pricing policies but also on non-price supportive policies such as banking system reform, sanctions relief, branding strengthening, target market diversification, and obtaining international quality certifications. These measures can improve market efficiency while increasing Iran’s share in global shrimp markets and reducing risks arising from the concentration of target markets.

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