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Estimating a Demand System with Choke Prices

  • Author(s): Golan, Amos
  • LaFrance, Jeffrey T
  • Perloff, Jeffrey M.
  • Seabold, Skipper
  • et al.
Abstract

We present a new, information-theoretic approach for estimating a system of many demand equations where the unobserved reservation or choke prices vary across consumers. We illustrate this method by estimating a nonlinear, almost ideal demand system (AIDS) for four types of meat using cross-sectional data from Mexico, where most households did not buy at least one type of meat during the survey week. The system of de­mand curves vary across demo­graphic groups.

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