Estimating censored and non homothetic demand systems: the generalized maximum entropy approach
AbstractThe econometric estimation of zero censored demand system faces major difficulties. The virtual price approach pioneered by Lee and Pitt (1986) in an econometric framework is theoretically consistent but empirically feasible only for homothetic demand system. It may even fail to converge depending on initial conditions. In this paper we propose to expand on this approach by relying on the generalized maximum entropy concept instead of the Maximum Likelihood paradigm. The former is robust to the error distribution while the latter must stick with a normality assumption. Accordingly the econometric specification of censored demand systems with virtual prices is made easier even with non homothetic preferences defined over several goods. Illustrative Monte Carlo sampling results show its relative performance.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by INRA UMR SMART in its series Working Papers SMART - LERECO with number 200912.
Date of creation: 2009
Date of revision:
Contact details of provider:
Postal: 4, Allée Adolphe Bobierre, CS 61103, 35011 Rennes Cedex
Web page: http://www.rennes.inra.fr/smart_eng/publications/working_papers
More information through EDIRC
censored demand system; virtual prices; generalised maximum entropy;
Find related papers by JEL classification:
- C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lee, Lung-Fei & Pitt, Mark M, 1986. "Microeconometric Demand Systems with Binding Nonnegativity Constraints: The Dual Approach," Econometrica, Econometric Society, vol. 54(5), pages 1237-42, September.
- van Akkeren, Marco & Judge, George & Mittelhammer, Ron, 2002.
"Generalized moment based estimation and inference,"
Journal of Econometrics,
Elsevier, vol. 107(1-2), pages 127-148, March.
- George Judge & Marco Van_Akkeren, 2000. "Generalized Moment Based Estimation and Inference," Econometric Society World Congress 2000 Contributed Papers 0073, Econometric Society.
- Moschini, GianCarlo, 1999.
"Imposing Local Curvature Conditions in Flexible Demand System,"
Staff General Research Papers
1745, Iowa State University, Department of Economics.
- Moschini, Giancarlo, 1999. "Imposing Local Curvature Conditions in Flexible Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 487-90, October.
- Neary, J.P & Roberts, K.W.S, 1978.
"The Theory of Household Behaviour under Rationing,"
The Warwick Economics Research Paper Series (TWERPS)
132, University of Warwick, Department of Economics.
- William A. Barnett & Meenakshi Pasupathy, 2001.
"Regularity Of The Generalized Quadratic Production Model: A Counterexample,"
- William Barnett & Meenakshi Pasupathy, 2003. "Regularity of the Generalized Quadratic Production Model: A Counterexample," Econometric Reviews, Taylor and Francis Journals, vol. 22(2), pages 135-154.
- William Barnett & Meenakshi Pasupathy, 2012. "Regularity Of The Generalized Quadratic Production Model: A Counterexample," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201235, University of Kansas, Department of Economics, revised Sep 2012.
- Romer, Paul, 1994.
"New goods, old theory, and the welfare costs of trade restrictions,"
Journal of Development Economics,
Elsevier, vol. 43(1), pages 5-38, February.
- Paul M. Romer, 1994. "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," NBER Working Papers 4452, National Bureau of Economic Research, Inc.
- 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.
- Barnett, William A., 2002. "Tastes and technology: curvature is not sufficient for regularity," Journal of Econometrics, Elsevier, vol. 108(1), pages 199-202, May.
- Jon Haveman & David Hummels, 2004. "Alternative hypotheses and the volume of trade: the gravity equation and the extent of specialization," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 199-218, February.
- Soest, Arthur van & Kapteyn, Arie & Kooreman, Peter, 1993.
"Coherency and regularity of demand systems with equality and inequality constraints,"
Journal of Econometrics,
Elsevier, vol. 57(1-3), pages 161-188.
- Soest, A.H.O. van & Kooreman, P. & Kapteyn, A.J., 1990. "Coherency and regularity of demand systems with equality and inequality constraints," Discussion Paper 1990-1, Tilburg University, Center for Economic Research.
- Soest, A.H.O. van & Kapteyn, A.J. & Kooreman, P., 1993. "Coherency and regularity of demand systems with equality and inequality constraint," Open Access publications from Tilburg University urn:nbn:nl:ui:12-364384, Tilburg University.
- Gallant, A. Ronald & Golub, Gene H., 1984.
"Imposing curvature restrictions on flexible functional forms,"
Journal of Econometrics,
Elsevier, vol. 26(3), pages 295-321, December.
- A. Ronald Gallant & Gene H. Golub, 1982. "Imposing Curvature Restrictions on Flexible Functional Forms," Discussion Papers 538, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Golan, Amos & Judge, George & Perloff, Jeffrey, 1997. "Estimation and inference with censored and ordered multinomial response data," Journal of Econometrics, Elsevier, vol. 79(1), pages 23-51, July.
- Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers 1488, Iowa State University, Department of Economics.
- Channing Arndt & Songquan Liu & Paul Preckel, 1999. "On dual approaches to demand systems estimation in the presence of binding quantity constraints," Applied Economics, Taylor & Francis Journals, vol. 31(8), pages 999-1008.
- Van Soest, Arthur & Kooreman, Peter, 1990. "Coherency of the indirect translog demand system with binding nonnegativity constraints," Journal of Econometrics, Elsevier, vol. 44(3), pages 391-400, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne Chauvel).
If references are entirely missing, you can add them using this form.