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The Structure of Constant Elasticity Demand Models

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Abstract

The demand model with constant price and income elasticities has been used extensively in applied agricultural economics. This paper analyzes the structure of incomplete systems of constant elasticity demand functions. It is demonstrated that there is a duality theory for incomplete demand systems that is analogous to the duality theory for complete systems. This theory permits the recovery of that portion of the direct and indirect preferences pertaining to the goods of interest, and we can calculate exact welfare measures for changes in income and in the prices of these goods. For an incomplete system of constant elasticity demands, the Slutsky symmetry restrictions for integrability are presented and the implied structure of the direct and indirect preferences with respect to the prices and goods of interest is derived.

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File URL: http://faculty.ses.wsu.edu/LaFrance/reprints/JTL-AJAE-1986.pdf
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File URL: http://dx.doi.org/10.2307/1241539
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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number archive-28.

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Length: 10 pages
Date of creation: 1986
Date of revision:
Publication status: published in American Journal of Agricultural Economics: Vol.68: Iss.3 ,543-552
Handle: RePEc:mos:moswps:archive-28

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Postal: Department of Economics, Monash University, Victoria 3800, Australia
Phone: +61-3-9905-2493
Fax: +61-3-9905-5476
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Web page: http://www.buseco.monash.edu.au/eco/
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Web: http://www.buseco.monash.edu.au/eco/research/papers/

Related research

Keywords: Consumer behaviour; demand models; welfare analysis;

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Citations

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Cited by:
  1. Larson, Douglas M. & Lew, Daniel K. & Shaikh, Sabina L., 2002. "Estimating The Opportunity Cost Of Recreation Time In An Integrable 2-Constraint Count Demand Model," 2002 Annual meeting, July 28-31, Long Beach, CA 19600, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Jeffrey T. LaFrance & Rulon D. Pope, 2010. "Duality Theory for Variable Costs in Joint Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 755-762.
  3. Chanyalew, Demese & Belete, Abenet, 1997. "A Statistical Analysis Of Demand For Beef, Mutton/Goat, Pork And Chicken In Kenya, 1961-1991," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 36(1), March.
  4. Just, Richard E. & Gilligan, Daniel O., 1998. "Compensating Variation Without Apology? Willingness-To-Pay And The Failure Of Integrability," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20814, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Lanfranco, Bruno A. & Ames, Glenn C.W. & Huang, Chung L., 2001. "Comparisons Of Hispanic Households' Demand For Meat With Other Ethnic Groups," Faculty Series 16710, University of Georgia, Department of Agricultural and Applied Economics.
  6. Germán Coloma, 2006. "Estimation of demand systems based on elasticities of substitution," CEMA Working Papers: Serie Documentos de Trabajo. 322, Universidad del CEMA.
  7. Loehman, Edna T., 1991. "Alternative Measures of Benefit for Nonmarket Goods Which are Substitutes or Complements for Market Goods," Working Papers 115913, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
  8. Tey, (John) Yeong-Sheng & Shamsudin, Mad Nasir & Mohamed, Zainalabidin & Abdullah, Amin Mahir & Radam, Alias, 2008. "Demand for beef in Malaysia: Quality or Quantity?," MPRA Paper 15035, University Library of Munich, Germany.
  9. Phaneuf, Daniel J. & Smith, V. Kerry, 2006. "Recreation Demand Models," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 15, pages 671-761 Elsevier.
  10. Lanfranco, Bruno A. & Ames, Glenn C.W. & Huang, Chung L., 2002. "Comparisons Of Hispanic Households' Demand For Meats With Other Ethnic Groups," Journal of Food Distribution Research, Food Distribution Research Society, vol. 33(01), March.
  11. Jeffrey T. LaFrance, 1990. "Incomplete Demand Systems And Semilogarithmic Demand Models," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 34(2), pages 118-131, 08.
  12. Buhr, Brian L., 1993. "A Quarterly Econometric Simulation Model Of The U.S. Livestock And Meat Sector," Staff Papers 13465, University of Minnesota, Department of Applied Economics.
  13. van Tongeren, Frank & van Meijl, Hans & Surry, Yves, 2001. "Global models applied to agricultural and trade policies: a review and assessment," Agricultural Economics, Blackwell, vol. 26(2), pages 149-172, November.
  14. Heien, Dale, 1988. "Consumer Welfare Measures: Some Comparative Results," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 17(2), October.
  15. Guijing WANG & Stanley M. FLETCHER & Dale H. CARLEY, . "Determinants Of Demand For Beef: The Impact Of Fat Trimming," Department of Resource Economics Regional Research Project 95412, University of Massachusetts.
  16. Terry L. Kastens & Gary W. Brester, 1996. "Model Selection and Forecasting Ability of Theory-Constrained Food Demand Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 301-312.
  17. Eldon V. Ball & Ricardo Cavazos & Jeffrey T. LaFrance & Rulon Pope & Jesse Tack, 2010. "Aggregation and Arbitrage in Joint Production," Development Research Unit Working Paper Series archive-22, Monash University, Department of Economics.

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