IDEAS home Printed from https://ideas.repec.org/a/wly/agribz/v21y2005i4p565-584.html
   My bibliography  Save this article

Estimation of price elasticities from cross-sectional data

Author

Listed:
  • Chanjin Chung

    (322 Agricultural Hall, Oklahoma State University, Stillwater, Oklahoma 74078)

  • Diansheng Dong

    (311 Warren Hall, Cornell University, Ithaca, New York 14853)

  • Todd M. Schmit

    (312 Warren Hall, Cornell University, Ithaca, New York 14853)

  • Harry M. Kaiser

    (346 Warren Hall, Cornell University, Ithaca, New York 14853)

  • Brian W. Gould

    (411 Taylor Hall, University of Wisconsin-Madison, Madison, Wisconsin 53707)

Abstract

This study develops an empirical framework to estimate quality-adjusted price elasticities from cross-sectional data. The new approach shows the importance of properly adjusting for quality variation in both prices and quantities in demand analysis. When quality adjustment is concerned only with price, the unit value-based elasticity tends to overstate the true price elasticity. However, when the quality adjustment is considered with both price and quantity, the direction of bias depends on the level of the true price elasticity. If the true price elasticity is unit elastic, there would be no bias. However, the price elasticity estimated with unit values would understate a true inelastic price elasticity while it would overstate a true elastic price elasticity. [EconLit citations: D120 Q110]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 565-584, 2005.

Suggested Citation

  • Chanjin Chung & Diansheng Dong & Todd M. Schmit & Harry M. Kaiser & Brian W. Gould, 2005. "Estimation of price elasticities from cross-sectional data," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 565-584.
    • Handle: RePEc:wly:agribz:v:21:y:2005:i:4:p:565-584
    DOI: 10.1002/agr.20065
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/agr.20065
    File Function: Link to full text; subscription required
    Download Restriction: no
    File URL: https://libkey.io/10.1002/agr.20065?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Wales, T. J. & Woodland, A. D., 1983. "Estimation of consumer demand systems with binding non-negativity constraints," Journal of Econometrics, Elsevier, vol. 21(3), pages 263-285, April.
    2. Lewbel, Arthur, 1996. "Aggregation without Separability: A Generalized Composite Commodity Theorem," American Economic Review, American Economic Association, vol. 86(3), pages 524-543, June.
    3. J. Scott Shonkwiler & Steven T. Yen, 1999. "Two-Step Estimation of a Censored System of Equations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 972-982.
    4. Deaton, Angus, 1988. "Quality, Quantity, and Spatial Variation of Price," American Economic Review, American Economic Association, vol. 78(3), pages 418-430, June.
    5. Julie A. Nelson, 1991. "Quality Variation and Quantity Aggregation in Consumer Demand for Food," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1204-1212.
    6. Thomas L. Cox & Michael K. Wohlgenant, 1986. "Prices and Quality Effects in Cross-Sectional Demand Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 908-919.
    7. Goldman, Fred & Grossman, Michael, 1978. "The Demand for Pediatric Care: An Hedonic Approach," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 259-280, April.
    8. Heien, Dale & Wessells, Cathy Roheim, 1990. "Demand Systems Estimation with Microdata: A Censored Regression Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 365-371, July.
    9. Diansheng Dong & Brian W. Gould, 2000. "Quality versus quantity in Mexican household poultry and pork purchases," Agribusiness, John Wiley & Sons, Ltd., vol. 16(3), pages 333-355.
    10. H. S. Houthakker, 1952. "Compensated Changes in Quantities and Qualities Consumed," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 19(3), pages 155-164.
    11. Federico Perali & Jean-Paul Chavas, 2000. "Estimation of Censored Demand Equations from Large Cross-Section Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 1022-1037.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Haoatai, Heinarii & Monypenny, Richard, 2011. "Export demand for Tahitian black pearls," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 19, pages 1-16.
    2. Kaimba, George K. & Mithöfer, Dagmar & Muendo, Kavoi M., 2021. "Commercialization of underutilized fruits: Baobab pulp supply response to price and non-price incentives in Kenya," Food Policy, Elsevier, vol. 99(C).
    3. Cuma Akbay, 2007. "Urban Households’ Cooking Oil and Fat Consumption Patterns in Turkey: Quality Vs. Quantity," Quality & Quantity: International Journal of Methodology, Springer, vol. 41(6), pages 851-867, December.
    4. Kaimba, George K. & Muendo, Kavoi M. & Mithofer, Dagmar, 2020. "Marketing of baobab pulp in Kenya: Collectors’ choice of rural versus urban markets," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 15(3), September.
    5. Thiele, Silke, 2008. "Elastizitäten der Nachfrage privater Haushalte nach Nahrungsmitteln – Schätzung eines AIDS auf Basis der Einkommens- und Verbrauchsstichprobe 2003," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 57(05), pages 1-11.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gould, Brian W. & Dong, Diansheng, 2004. "Product Quality And The Demand For Food: The Case Of Urban China," 2004 Annual meeting, August 1-4, Denver, CO 20010, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Hayden Stewart & Noel Blisard, 2008. "Who Pays More for Food?," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 150-168, February.
    3. Davis, Christopher G. & Dong, Diansheng & Blayney, Donald P. & Yen, Steven T. & Stillman, Richard, 2012. "U.S. Fluid Milk Demand: A Disaggregated Approach," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 15(1), pages 1-26, February.
    4. Stewart, Hayden & Blisard, Noel, 2006. "Household versus Community Effects: Who Really Pays More for Food?," 2006 Annual meeting, July 23-26, Long Beach, CA 21053, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Vu, Linh Hoang, 2012. "Estimation Of Food Demand In Vietnam," MPRA Paper 94801, University Library of Munich, Germany.
    6. Stewart, Hayden & Dong, Diansheng, 2011. "Variation in retail costs for fresh vegetables and salty snacks across communities in the United States," Food Policy, Elsevier, vol. 36(2), pages 128-135, April.
    7. Vardges Hovhannisyan & Hayk Khachatryan, 2017. "Ornamental Plants in the United States: An Econometric Analysis of a Household‐Level Demand System," Agribusiness, John Wiley & Sons, Ltd., vol. 33(2), pages 226-241, April.
    8. Andrej Cupák & Peter Tóth, 2017. "Measuring the Efficiency of VAT reforms: Evidence from Slovakia," Working and Discussion Papers WP 6/2017, Research Department, National Bank of Slovakia.
    9. Peter Tóth & Andrej Cupák & Marian Rizov, 2021. "Measuring the efficiency of VAT reforms: a demand system simulation approach," Oxford Economic Papers, Oxford University Press, vol. 73(3), pages 1218-1243.
    10. Femenia, Fabienne, 2019. "A Meta-Analysis of the Price and Income Elasticities of Food Demand," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 68(2), June.
    11. Gould, Brian W. & Lee, Yoonjung & Dong, Diansheng & Villarreal, Hector J., 2002. "Household Size And Composition Impacts On Meat Demand In Mexico: A Censored Demand System Approach," 2002 Annual meeting, July 28-31, Long Beach, CA 19722, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Golan, Amos & LaFrance, Jeffrey T & Perloff, Jeffrey M. & Seabold, Skipper, 2017. "Estimating a Demand System with Choke Prices," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4qt9q8vr, Department of Agricultural & Resource Economics, UC Berkeley.
    13. Zhuo Chen & Steven Yen, 2005. "On bias correction in the multivariate sample-selection model," Applied Economics, Taylor & Francis Journals, vol. 37(21), pages 2459-2468.
    14. Tselepidakis, Elina, 2015. "Food Safety and the Demand for Leafy Greens," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205583, Agricultural and Applied Economics Association.
    15. Salois, Matthew J. & Tiffin, J. Richard, 2010. "The Health Effects Of A Fiscal Food Policy," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany 116394, European Association of Agricultural Economists.
    16. McCullough, Ellen & Zhen, Chen & Shin, Soye & Lu, Meichen & Arsenault, Joanne, 2022. "The role of food preferences in determining diet quality for Tanzanian consumers," Journal of Development Economics, Elsevier, vol. 155(C).
    17. Thiele Silke, 2010. "Erhöhung der Mehrwertsteuer für Lebensmittel: Budget- und Wohlfahrtseffekte für Konsumenten / Increase of the Value Added Tax (VAT): Budget- and Welfare- Effects for Consumers," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(1), pages 115-130, February.
    18. Meyerhoefer, Chad D. & Ranney, Christine K. & Sahn, David E., 2003. "Consistent Estimation Of Longitudinal Censored Demand Systems: An Application To Transition Country Data," Working Papers 127252, Cornell University, Department of Applied Economics and Management.
    19. Thiele, Silke, 2008. "Elastizitäten der Nachfrage privater Haushalte nach Nahrungsmitteln – Schätzung eines AIDS auf Basis der Einkommens- und Verbrauchsstichprobe 2003," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 57(05), pages 1-11.
    20. Dong, Diansheng & Gould, Brian W. & Kaiser, Harry M., 2002. "The Structure Of Food Demand In Mexico: An Application Of The Amemiya-Tobin Approach To The Estimation Of A Censored System," 2002 Annual meeting, July 28-31, Long Beach, CA 19830, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:agribz:v:21:y:2005:i:4:p:565-584. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.