Markup pricing in the context of a violent conflict: differentiated apples in Hebron wholesale market

We investigate whether hostile international relations in the framework of the ongoing Israeli-Palestinian conflict has an effect on pricing and consumption patterns of different varieties of apples marketed in Palestine. For this purpose, we employ a discrete choice equilibrium model with product differentiation. Results suggest that the intensity level of the conflict has a positive (negative) effect on demand (price elasticity and markups). It is plausible that in times of uncertainty transactions are larger as producers have higher incentive to sell their stock and consumers prefer to accumulate food to avoid risk that violence and security measures will impede trade.