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On The Use Of Price Ratio In Supply Response

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  • Chavas, Jean- Paul

Abstract

Because of a lack of data or multicollinearity problems, it is fairly common to include only a subset of the relevant prices in econometric model of supply response. This paper provides some evidence on the validity of using price ratios in this situation: A model of the U.S. poultry and egg industry where feed cost and output price are the only economic variables considered suggests that the use of price ratios would be inappropriate. If careful attention is given to model specification, it appears that homogeneity restrictions should not be imposed on supply response models unless the excluded prices are known to have little influence on production decisions.

Suggested Citation

  • Chavas, Jean- Paul, 1980. "On The Use Of Price Ratio In Supply Response," 1980 Annual Meeting, July 27-30, Urbana-Champaign, Illinois 278856, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea80:278856
    DOI: 10.22004/ag.econ.278856
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    File URL: https://ageconsearch.umn.edu/record/278856/files/aaea-1980-046.pdf
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    References listed on IDEAS

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    1. Rahn, Allan Paul, 1973. "A quarterly simulation model of the livestock and poultry subsectors for use in outlook and price analysis," ISU General Staff Papers 197301010800007165, Iowa State University, Department of Economics.
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    Cited by:

    1. Liu, Karen, 1981. "Multiple Crop Supply and Factor Demand Component of the World Grains, Oilseeds, and Livestock Model," Staff Reports 276718, United States Department of Agriculture, Economic Research Service.

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    Keywords

    Farm Management;

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