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Pre-Determined Demand and Theoretical Regularity Conditions: Their Importance for Consumer Food Demand Using AIDS and Policy Analysis Implications

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  • Senia, Mark
  • Dharmasena, Senarath

Abstract

The consideration of theoretical regularity restrictions is an important factor in demand analysis that is often ignored in empirical demand studies. Empirical studies tend to ignore this factor as regularity conditions are often violated. Also important is the need to account for pre-committed demand. If pre-committed demand is present, then models that do not account for this are incorrectly specified. The objective of this research is to examine the affect that ignoring pre-determined demand and theoretical regularity conditions will have on consumer food demand. To accomplish this we use the AIDS because of its wide use. We pay additional attention to regularity by testing for and imposing local curvature conditions. This research also will check for the presence and levels of pre-committed food demand. We use the Nielsen Homescan data to create monthly household level purchases of nine per-capita fiber rich food categories (bread, pasta, tortilla, fresh fruit, fresh vegetables, frozen fruit, frozen vegetables, canned fruit, and canned vegetables) for 2004-2014 in the United States. Then the paper discusses the differences in the intake of fiber rich foods that the estimation procedures have due to a proposed government policy change, such as a subsidy on fruit and vegetables.

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  • Senia, Mark & Dharmasena, Senarath, 2017. "Pre-Determined Demand and Theoretical Regularity Conditions: Their Importance for Consumer Food Demand Using AIDS and Policy Analysis Implications," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252740, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea17:252740
    DOI: 10.22004/ag.econ.252740
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    Keywords

    Food Consumption/Nutrition/Food Safety; Health Economics and Policy;

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