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Demand Function Estimation and the Law of One Price

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  • Paul M. Anglin

Abstract

This paper shows that the method of estimating of demand functions may contain an erroneous, implicit assumption when aggregated data are used. This assumption, revealed by the choice of regressors, yields estimates of own price elasticity and other coefficients that are inconsistent. It can also cause heteroscedasticity in the second stage of two-stage least squares estimation where none would otherwise exist.

Suggested Citation

  • Paul M. Anglin, 1990. "Demand Function Estimation and the Law of One Price," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 125-143, February.
    • Handle: RePEc:cje:issued:v:23:y:1990:i:1:p:125-43
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