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When Are Supply And Demand Determined Recursively Rather Than Simultaneously?

Author

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  • Kathryn Graddy

    (Department of Economics and International Business School, Brandeis University, Waltham, MA 02453, USA.)

  • Peter Kennedy

    (Department of Economics, Simon Fraser University, Burnaby, BC V5A 1S6, Canada.)

Abstract

When supply and demand are recursive, with uncorrelated cross-equation errors, least-squares estimation has no simultaneous-equation bias. Supply to a daily fish market is determined by the previous night's catch; hence this would appear to be a good example of a recursive market. Despite this, data from the Fulton fish market are treated in the literature, without adequate explanation, as coming from a market in which price and quantity are determined simultaneously. We provide the missing explanation, and in doing so reveal some issues about simultaneity that deserve better coverage in our textbooks and fuller consideration by applied econometricians.

Suggested Citation

  • Kathryn Graddy & Peter Kennedy, 2010. "When Are Supply And Demand Determined Recursively Rather Than Simultaneously?," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 36(2), pages 188-197, Spring.
    • Handle: RePEc:pal:easeco:v:36:y:2010:i:2:p:188-197
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    Citations

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    Cited by:

    1. Kiviet, Jan, 2019. "Instrument-free inference under confined regressor endogeneity; derivations and applications," MPRA Paper 96839, University Library of Munich, Germany.
    2. Kiviet, Jan F., 2023. "Instrument-free inference under confined regressor endogeneity and mild regularity," Econometrics and Statistics, Elsevier, vol. 25(C), pages 1-22.
    3. Graddy, Kathryn & Hall, George, 2011. "A dynamic model of price discrimination and inventory management at the Fulton Fish Market," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 6-19.
    4. Min-Yang Lee, 2014. "Hedonic Pricing of Atlantic Cod: Effects of Size, Freshness, and Gear," Marine Resource Economics, University of Chicago Press, vol. 29(3), pages 259-277.

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