Testing Market Integration: Some Critical Comments

I have serious doubts as to whether any particular test can be an adequate measure of market efficiency. I have tried to recapitulate some reasons why different prices may relate to each other in different ways, without trying to be too dogmatic as to what is the right approach. Prices may cover different times, places and products. We should not be trying to relate one price to another without considering other prices that relate to cost of transfer from one state to another. The idea that the participants in the markets may be maximising their utility has implications for what may be an appropriate set of relationships among prices; but these implications may not be apparent until one looks at the markets for several products. Perhaps in the course of this discussion I shall veer away from a pure concept of ‘market integration’ towards a view of how prices in different markets should relate to each other.