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Bayes' Estimates Of The Double Hurdle Model In The Presence Of Fixed Costs

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  • Holloway, Garth J.
  • Barrett, Christopher B.
  • Ehui, Simeon K.

Abstract

We present a model of market adoption (participation) where the presence of non-negligible fixed costs leads to non-zero censoring of the traditional double-hurdle regression. Fixed costs arise due to household resources that must be devoted a priori to the decision to participate in the market. These costs-usually a cost of time-motivate two-step decision-making and focus attentions on the minimum-efficient scale of operations (the minimum amount of milk sales) at which market entry becomes viable. This focus, in turn, motivates a non-zero-censored Tobit regression estimated through routine application of Markov chain Monte Carlo Methods.

Suggested Citation

  • Holloway, Garth J. & Barrett, Christopher B. & Ehui, Simeon K., 2002. "Bayes' Estimates Of The Double Hurdle Model In The Presence Of Fixed Costs," Working Papers 14741, Cornell University, Department of Applied Economics and Management.
    • Handle: RePEc:ags:cudawp:14741
    DOI: 10.22004/ag.econ.14741
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    1. Balsevich, Fernando & Schuetz, Paul & Perez, Edwin, 2006. "Cattle Producer' Participation in Market Channels in Central America: Supermarkets, Processors, and Auctions," Staff Paper Series 11482, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    2. Asafu-Adjaye, John, 2008. "Factors Affecting the Adoption of Soil Conservation Measures: A Case Study of Fijian Cane Farmers," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(1), pages 1-19, April.
    3. Barrett, Christopher B., 2008. "Smallholder market participation: Concepts and evidence from eastern and southern Africa," Food Policy, Elsevier, vol. 33(4), pages 299-317, August.
    4. Escobal D'Angelo, Javier & Torero, Maximo, 2006. "Access to Dynamic Markets for Small Commercial Farmers: The Case of Potato Production in the Peruvian Andes," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25667, International Association of Agricultural Economists.

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