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Specification and Estimation of Regular Inverse Demand Systems: A Distance Function Approach

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  • K. K. Gary Wong
  • Keith R. McLaren

Abstract

To allow realistic policy simulations in a changing environment, inverse demand systems must remain regular over substantial variations in quantities. The distance function is a convenient vehicle for generating such systems. While its use directly yields Hicksian inverse demand functions, those functions will not usually have an explicit representation in terms of the observable variables. However, this problem need not hinder estimation and can be solved by using a numerical inversion estimation approach. This article develops the formal theory for using distance functions in this context and demonstrates the operational feasibility of the method. Copyright 2005, Oxford University Press.

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  • K. K. Gary Wong & Keith R. McLaren, 2005. "Specification and Estimation of Regular Inverse Demand Systems: A Distance Function Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 823-834.
    • Handle: RePEc:oup:ajagec:v:87:y:2005:i:4:p:823-834
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2005.00772.x
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    Cited by:

    1. Krishna Pendakur & Stefan Sperlich, 2010. "Semiparametric estimation of consumer demand systems in real expenditure," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(3), pages 420-457.
    2. John Muellbauer & Gavin Cameron & John Muellbauer, 2006. "Was There A British House Price Bubble? Evidence from a Regional Panel," Economics Series Working Papers 276, University of Oxford, Department of Economics.
    3. Michele Baggio & Jean-Paul Chavas, 2006. "On the Consumer Value of Environmental Diversity," Working Papers 35/2006, University of Verona, Department of Economics.
    4. Sooriyakumar Krishnapillai, 2012. "Impact of NAFTA on the Preference for Meat Consumption in USA: An Inverse Demand System Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 2(1), pages 79-84.
    5. Färe, Rolf & Grosskopf, Shawna & Hayes, Kathy J. & Margaritis, Dimitris, 2008. "Estimating demand with distance functions: Parameterization in the primal and dual," Journal of Econometrics, Elsevier, vol. 147(2), pages 266-274, December.
    6. Moore, Chris, 2015. "Welfare Estimates of Avoided Ocean Acidification in the U.S. Mollusk Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(1), pages 1-13.
    7. Esposti, Roberto, 2014. "On why and how agriculture declines," Structural Change and Economic Dynamics, Elsevier, vol. 31(C), pages 73-88.
    8. Lee, Young-Jae & Kennedy, P. Lynn, 2013. "Quantity And Exchange Rate Effects On U.S. Trout Prices," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142133, Southern Agricultural Economics Association.
    9. Flavius Badau & Nicholas Rada, 2022. "Disequilibrium effects from misallocated markets: An application to agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 53(4), pages 592-604, July.
    10. Eric Sjöberg, 2015. "Pricing on the Fish Market--Does Size Matter?," Marine Resource Economics, University of Chicago Press, vol. 30(3), pages 277-296.
    11. Chris Moore & Charles Griffiths, 2018. "Welfare analysis in a two-stage inverse demand model: an application to harvest changes in the Chesapeake Bay," Empirical Economics, Springer, vol. 55(3), pages 1181-1206, November.
    12. Hjertstrand, Per, 2022. "Nonparametric Analysis of the Mixed-Demand Model," Working Paper Series 1430, Research Institute of Industrial Economics.
    13. Lee, Young-Jae & Kennedy, P. Lynn, 2008. "An Examination of Inverse Demand Models: An Application to the U.S. Crawfish Industry," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), pages 1-14.
    14. Sheng-Ju Huang & Jia-Jan Lee, 2018. "Verification of Seasonal Fluctuation Effects of Fruits in the Inverse Demand System: The Evidence from Taiwan," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 6(1), pages 74-82, March.
    15. K. K. G. Wong, 2013. "Trade distance functions and the derivation of inverse demand for imports," Applied Economics, Taylor & Francis Journals, vol. 45(29), pages 4160-4168, October.
    16. Roberto ESPOSTI, 2007. "On the Decline of Agriculture. Evidence from Italian Regions in the Post-WWII Period," Working Papers 300, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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