The Benefit Function Approach to Modeling Price-Dependent Demand Systems: An Application of Duality Theory
In this article we advocate more extensive use of the benefit function in specifying price-dependent or inverse demand models. In particular, we demonstrate how duality theory may be used to establish the inter-relationships 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 also make use of a numerical inversion estimation method to rectify the "unobservability of utility problem" encountered in the empirical analysis of these inverse demands. To illustrate the usefulness of the proposed methods, we estimate two systems of inverse demands for Japanese quarterly fish consumption. Results generally indicate that the proposed methods are promising and operationally feasible so that we have opened up a wider range of empirical inverse demand specifications that can be subjected to tight theoretical restrictions.
|Date of creation:||Oct 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.buseco.monash.edu.au/depts/ebs/
More information through EDIRC
|Order Information:|| Web: http://www.buseco.monash.edu.au/depts/ebs/pubs/wpapers/ Email: |
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.:
- Robert H. Beach & Matthew T. Holt, 2001.
"Incorporating Quadratic Scale Curves in Inverse Demand Systems,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 83(1), pages 230-245.
- Beach, Robert H. & Holt, Matthew T., 1999. "Incorporating Quadratic Scale Curves In Inverse Demand Systems," 1999 Annual meeting, August 8-11, Nashville, TN 21579, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Moschini, Giancarlo & Moro, Daniele, 1994.
"Autocorrelation specification in singular equation systems,"
Elsevier, vol. 46(4), pages 303-309, December.
- Moschini, GianCarlo & Moro, D., 1994. "Autocorrelation Specification in Singular Equation Systems," Staff General Research Papers 11134, Iowa State University, Department of Economics.
- Pollak, R.A. & Wales, T.J., 1990.
"The Likelihood Dominance Criterion: A New Approach To Model Selection,"
Discussion Papers in Economics at the University of Washington
90-10, Department of Economics at the University of Washington.
- Pollak, Robert A. & Wales, Terence J., 1991. "The likelihood dominance criterion : A new approach to model selection," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 227-242, February.
- Pollak, R.A. & Wales, T.J., 1990. "The Likelihood Dominance Criterion: A New Approach To Model Selection," Working Papers 90-10, University of Washington, Department of Economics.
- Deaton, Angus, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," Review of Economic Studies, Wiley Blackwell, vol. 46(3), pages 391-405, July.
- Holt, Matthew T., 2002. "Inverse demand systems and choice of functional form," European Economic Review, Elsevier, vol. 46(1), pages 117-142, January.
- Hoanjae Park & Walter N. Thurman, 1999. "On Interpreting Inverse Demand Systems: A Primal Comparison of Scale Flexibilities and Income Elasticities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 950-958.
- Hanoch, Giora, 1975. "Production and Demand Models with Direct or Indirect Implicit Additivity," Econometrica, Econometric Society, vol. 43(3), pages 395-419, May.
- James Eales & Catherine Durham & Cathy R. Wessells, 1997. "Generalized Models of Japanese Demand for Fish," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1153-1163.
- Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
- Michele Baggio & Jean-Paul Chavas, 2006. "On the Consumer Value of Environmental Diversity," Working Papers 35, University of Verona, Department of Economics.
- Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, vol. 59(3), pages 711-30, May.
- Eales, James S. & Unnevehr, Laurian J., 1994. "The inverse almost ideal demand system," European Economic Review, Elsevier, vol. 38(1), pages 101-115, January.
When requesting a correction, please mention this item's handle: RePEc:msh:ebswps:2008-8. 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: (Simone Grose)
If references are entirely missing, you can add them using this form.