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The Benefit Function Approach to Modeling Price-Dependent Demand Systems: An Application of Duality Theory

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  • Keith R. McLaren
  • K. K. Gary Wong

Abstract

In this article, we advocate more extensive use of the benefit function in specifying price-dependent or inverse demand models. We demonstrate how duality theory may be used to establish the interrelationships between the Marshallian (or Hicksian) inverse demands and Luenberger’s adjusted price functions, allowing estimable inverse demands to be derived directly from a benefit function. We estimate two systems of inverse demands for Japanese quarterly fish consumption. Results indicate that the procedures and methods employed here appear promising, and may prove beneficial for quantity and welfare analysis when modeling systems of inverse demand functions. Copyright 2009, Oxford University Press.

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  • Keith R. McLaren & K. K. Gary Wong, 2009. "The Benefit Function Approach to Modeling Price-Dependent Demand Systems: An Application of Duality Theory," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1110-1123.
    • Handle: RePEc:oup:ajagec:v:91:y:2009:i:4:p:1110-1123
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    Cited by:

    1. Hovhannisyan, Vardges & Stiegert, Kyle W. & Bozic, Marin, 2013. "On Endogeneity Of Retail Market Power In An Equilibrium Analysis: A Control Function Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149830, Agricultural and Applied Economics Association.
    2. Anonymous & Bosch, Darrell J., 2013. "Table of contents," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(01), February.
    3. Chavas, Jean-Paul, 2013. "On Demand Analysis and Dynamics: A Benefit Function Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149683, Agricultural and Applied Economics Association.
    4. Jean-Michel Courtault & Bertrand Crettez & Naïla Hayek, 2008. "Complementarity and Substitutability: A Dual Approach Based on Luenberger's Benefit Function," Working Papers halshs-00447417, HAL.
    5. Hovhannisyan, Vardges & Bozic, Marin, 2013. "A Benefit-Function Approach to Studying Market Power: An Application to the U.S. Yogurt Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(2), pages 1-15, August.
    6. Wong, K.K. Gary, 2013. "An empirical investigation of the trade benefit function," Economics Letters, Elsevier, vol. 119(2), pages 150-153.
    7. Jean-Paul Chavas & Michele Baggio, 2010. "On duality and the benefit function," Journal of Economics, Springer, vol. 99(2), pages 173-184, March.

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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