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Hedonic Pricing of Components and Cointegration Relationships: A Dynamic Analysis of Dairy Product Prices

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  • Chavas, Jean-Paul
  • Kim, Kwansoo

Abstract

The paper investigates the implications of hedonic pricing of components, with an application to the dynamics of dairy product prices. A conceptual model of hedonic pricing is developed under a Leontief technology, showing how commodity prices reflect the underlying value of their components. Implications for the existence of cointegration relationships among commodity prices are derived. An application to the pricing and dynamics of selected U.S. dairy commodities is presented. It provides evidence on the role of component valuation in the dynamics of dairy commodity prices in the short run as well as in the long run. Distinguishing between market regime and government regime (when the government price support is active), the analysis finds significant differences in dairy price dynamics between the two regimes.

Suggested Citation

  • Chavas, Jean-Paul & Kim, Kwansoo, 2001. "Hedonic Pricing of Components and Cointegration Relationships: A Dynamic Analysis of Dairy Product Prices," Working Papers 201572, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    • Handle: RePEc:ags:uwfswp:201572
    DOI: 10.22004/ag.econ.201572
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    References listed on IDEAS

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