A Generalized Utility Model with Binding Non-Negativity Constraints: Demand for Beer
We propose a Generalized Quadratic Utility (GQU) model for an incomplete demand system with binding non-negativity constraints which is flexible in income and price effects. The model accounts for zero consumption using choke prices identified by Kuhn-Tucker conditions. The GQU demand system can overcome the analytical and computational difficulties of the Kuhn-Tucker approach. Applying a homothetic AIDS specification, we estimate the demand for ale and lager beers and find that household income, age, presence of child, and prices play significant roles in beer consumption. The own-price elasticities are greater than unity. The cross-price elasticities suggest substitutes between ales and lagers.
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., 1987.
"Microeconometric Models of Rationing, Imperfect Markets, and Non-Negativity Constraints,"
7470, University of Minnesota, Economic Development Center.
- Lee, Lung-Fei & Pitt, Mark M., 1987. "Microeconometric models of rationing, imperfect markets, and non-negativity constraints," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 89-110.
- Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September.
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometric Society, vol. 47(1), pages 153-61, January.
- Jeremy W. Bray & Brett R. Loomis & Mark Engelen, 2009. "You save money when you buy in bulk: does volume-based pricing cause people to buy more beer?," Health Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 607-618.
- J. Scott Shonkwiler & Steven T. Yen, 1999. "Two-Step Estimation of a Censored System of Equations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 972-982.
- LaFrance, Jeffrey T., 1985. "Linear demand functions in theory and practice," Journal of Economic Theory, Elsevier, vol. 37(1), pages 147-166, October.
- Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-44, September.
When requesting a correction, please mention this item's handle: RePEc:jmp:jm2013:pli830. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.