The price elasticity of electricity demand in South Africa

This paper examines the effects of price on the demand for electricity in South Africa over the period 1950–83. Emphasis is placed on the estimation of the long-run own-price elasticity of electricity demand. An unconstrained distributed lag model is used and the 12 years elasticity is estimated to be –0.90. The policy implications of this finding are discussed.     

Elasticity estimates of farmed salmon demand in Spain and Italy

In this paper, estimates of the elasticities that characterize the structure of demand for farmed salmon in Spain and Italy are reported. The demand models are specified using a Box-Cox transformation of the variables and a Hausman test is used to determine price endogeneity in the demand equations. The results show short-run unitary own-price elasticity of demand for farmed salmon in both markets, but long run estimates show significant elastic price response. Short run substitution of salmon for other fish species is not observed and, for both Spain and Italy, farmed salmon is characterized as a luxury good. Interestingly, we show that our a priori expectations about own-price elasticities being lower in smaller market areas is confirmed. Finally, the results obtained are compared to other recent results reported in the salmon demand literature.     

Economic determinants of global mobile telephony growth

This study examines the substitution effect between fixed-line and mobile telephony while controlling for the consumption externality associated with telephone networks. A dynamic demand model is estimated using a global telecommunications panel dataset comprised of 56 countries from 1995–2000. Estimation results show the presence of a substantial substitution effect. Additionally income and own-price elasticities are reported. Analysis of impulse responses for price, income and network size indicate substantial mobile telephone growth is yet to be realised. However, price ceilings imposed in the fixed-line network can retard the growth of the mobile network.     

The interest elasticity of household savings: a structural approach with German micro data

This paper empirically investigates the effects of changes in the interest rate as well as in the current and expected future consumer price levels on households’ consumption–savings decision. In a structural demand model applied to German consumption data, we use cross-sectional and longitudinal variation in prices and tax rates to construct individual after-tax interest rates and cluster-specific consumer prices. We find that the compensated own-price elasticities for savings as well as consumption are significantly negative, while the theoretical model implications of homogeneity and symmetry must be rejected. Importantly, we estimate the uncompensated interest rate elasticity of savings, in line with the literature, at around zero. Some heterogeneity in this elasticity is found along the savings and wealth distribution. We conclude that short-term policy-induced variation of net returns to savings is expected to have no significant effects on the level of compound savings.     

A generalized additive Tobit model

This paper proposes a semi-parametric approach to estimation in Tobit models. A generalized additive Tobit model of residential local long distance (intra-LATA) telephone demand is estimated on a cross-section of residential telephone consumers across twenty-eight states. While past studies of telecommunications demand have used fully parametric models, the model presented here is non-parametric in two dimensions: first no distributional assumption is made for the error distribution, and second, the demand equation is non-parametric with respect to price. We find that the elasticity of demand is substantially lower (in absolute value) that found in previous studies for a 40% cut in tariffs. First version received: July 2000/Final version received: March 2001 RID="*" ID="*"  I thank the referee and Associate Editor for suggestions which improved the paper. The views expressed here are of the author and not Analysis Group | Economics.     

Substitution between energy,capital and labour within industrial companies: A micro panel data analysis

Based on micro panel data for industrial companies, we estimate factor demand models with electricity, other energy, labour and machine capital as flexible inputs using both the translog and the linear logit specification. As opposed to the few previous micro (cross-section) data studies we find that both electricity and other energy are complements with capital. Substitution between electricity and other energy is limited. The own-price elasticity for electricity is −0.21 in the translog model and −0.19 in the linear logit model. The corresponding own-price elasticities are −0.45 and −0.23 for other energy, −0.08 and −0.05 for labour and −0.45 and −0.34 for capital.     

Export growth performance of less-developed countries

This paper has two purposes: (1) to estimate own-price, cross-price, and income elasticities of export demand for a sample of 41 LDCs; and (2) to test whether relative export growth performance of LDCs can be explained in terms of differing values of these elasticities. The study finds that, in conformance with the theory specified, export growth is enhanced by a smaller ownprice elasticity, a larger cross-price elasticity, and a larger income elasticity.     

Housing Prices in Urban China as Determined by Demand and Supply

This paper studies the demand for and supply of residential housing in urban China since the late 1980s when the urban housing market became commercialized. Using aggregated annual data from 1987 to 2012 in a simultaneous equations framework we show that the rapid increase in the urban residential housing price can be well explained by the forces of demand and supply, with income determining demand and cost of construction affecting supply. We find the income elasticity of demand for urban housing to be approximately 1, the price elasticity of demand to be approximately ?1.1 and the price elasticity of supply of the total housing stock to be approximately 0.5. The resulting long‐run effect of income on urban housing prices in elasticity terms is approximately 0.7, because the increase in income has shifted the demand curve outward more rapidly than the supply curve.     

Universal telecommunication service: A world perspective

Worldwide telecommunications demand is estimated in models for business and residential mainline telephone, and for mobile telephone service using separate models for developed and developing countries for the period 1996–2001. We test for cross-price elasticities between mainline and mobile service and find that the results are generally suggestive of current complementary relationships. We find residential monthly price elasticity to be no different than zero for a sample of developing countries, but the connection elasticity is statistically significant. Mobile monthly service elasticity is much larger than those for mainline service, suggesting that universal service in developing countries might be promoted more effectively with subsidies for mobile service. Income elasticities for the residential model are modest while the mobile service model income elasticity for developing countries is much higher. Expanding markets, income growth and enhanced education may be the ultimate universal service promoters.     

Estimation of an implied price elasticity of demand through current pricing practices

Researchers have long pursued better methods to estimate price elasticity of market-level demand. Due to a plethora of empirical problems, the estimates produced in many empirical studies leave researchers with wide confidence intervals that do little to clarify demand conditions. As a result, these estimates are of limited practical use to the firm facing a firm-level demand. Here, a non-statistical methodology based on seller optimization behaviour is applied that creates an ‘implied elasticity’ of firm-level demand that is robust, intuitively plausible and free of oppressive data requirements. These elasticities are tested in an applied setting against pricing managers’ surveyed estimates for customer price sensitivity for freight rail transportation services and it is found that the estimate is consistent with their pricing behaviour. This methodology is recommended for creating a simple, plausible starting point estimate for firm-level price elasticities, or using this calculation as an input to statistical studies.     

Structural shocks and dynamic elasticities in a long memory model of the US gasoline retail market

A structural multivariate long memory model of the US gasoline market is employed to disentangle structural shocks and to estimate the own-price elasticity of gasoline demand. Our main empirical findings are: (1) there is strong evidence of nonstationarity and mean reversion in the real price of gasoline and in gasoline consumption; (2) accounting for the degree of persistence present in the data is essential to assess the responses of these two variables to structural shocks; (3) the contributions of the different supply and demand shocks to fluctuations in the gasoline market vary across frequency ranges; and (4) long memory makes available an interesting range of convergent possibilities for gasoline demand elasticities. Our estimates suggest that after a change in prices, consumers undertake a few measures to reduce consumption in the short- and medium-run but are reluctant to implement major changes in their consumption habits.     

A short and intuitive proof of Marshall's Rule

Summary. When the price of an input factor to a production process increases, then the optimal output level declines and the input is substituted by other factors. Marshall's rule is a formula that determines the own-price elasticity for one factor as a weighted sum of the elasticities of output market demand and factor substitution. This note offers a proof for Marshall's rule that is significantly shorter and somewhat more intuitive than existing derivations. Received: February 19, 2001; revised version: April 3, 2002 RID="*" ID="*" I thank Charalambos Aliprantis, John Moore, Patrick Schmitz, and the anonymous referee for helpful suggestions. Support by the German Academic Exchange Service is gratefully acknowledged.     

City size and household food consumption: demand elasticities in Spain

Are food price elasticities different across city sizes? The aim of this article is to estimate expenditure and own-price elasticities for 10 aggregated food product groups using the Spanish Household Budget Survey for the year 2010. These products are the ones for which the survey provides information regarding prices and quantities, thus allowing the application of an Almost Ideal Demand System (AIDS) model with censored data. The estimation procedure allows not only comparisons to be made among households with different levels of income, but also the contribution of residence characteristics to variations in demand. The results confirm that the size of the city in which the household resides has a similar significant and relevant effect on consumption patterns as family income level. This is especially clear with own-price elasticities. In Spain, large central cities show a greater response to price changes than smaller cities or rural peripheral areas.     

Estimation of the effects of price on apartment water demand using cointegration and error correction techniques

Water price is a key instrument in regulating water demand in the residential sector. Many empirical studies have assessed the effects of price through quantifying the price elasticity of water demand. However, most of these studies have mainly focused on the single-family housing rather the multifamily housing. An in-depth understanding of the price elasticity of multifamily housing water demand is paramount for water planners in order to properly manage water use in the fast growing intensive housing developments in urban areas. This study investigates both the long-term and short-term price elasticities of water demand in the residential apartments in Auckland central city. Using 6 years of monthly time series data, the price elasticities were estimated through cointegration and error correction methods. The results showed that the price elasticities of water demand were ?0.14 and ?0.12 in the short term and the long term, respectively. The price is inelastic yet negative and statistically significant, thus it can play a role in demand management.     

Regulating prices for shifting between service providers

The price that a regulated access provider charges for shifting customers between service providers has significant welfare implications. Typical regulatory approaches to pricing, such as pricing based on fully allocated cost or incremental cost, ignore the characteristics of consumer demand. A theoretical alternative, Ramsey pricing, considers only the elasticity of demand for given products. This paper directs attention to the competitive process. Using US long-distance telephone services as an example, this paper shows how empirical evidence concerning customer acquisition costs, customer switching costs, and churn among service providers can help to inform price regulation.     

The demand for traded and non-traded goods in the U.S.

Annual postwar U.S. data are used to estimate the Rotterdam demand model for traded and non-traded goods. The estimated income elasticity is 1.51 for traded and 0.64 for non-traded goods, while the own-price elasticities are both between −0.3 and −0.2.     

EFFECTS OF PRICE AND AVAILABILITY ON ABORTION DEMAND

Over 1.5 million legal abortions were performed in the United States in 1988. State-level regulation affecting the price or availability of abortion services may expand given recent Supreme Court decisions. This paper uses state-level data pooled over time to estimate abortion demand. Using single cross-sections of state data, past studies find abortion demand per 1,000 pregnancies to be price inelastic and find income elasticity to be positive and significant. The analysis here shows that price elasticity estimates in a single cross-section are sensitive to the choice of state characteristics used to control for "abortion attitudes" within a state. Ajixed-efects model design with pooled data gives more robust abortion demand price elasticity estimates. The results suggest that any new state regulations that increase the costs of obtaining abortions will reduce abortion use and increase unintended fertility .     

The supply and demand for imports and exports in a simultaneous model

Previous studies on the behaviour of aggregate exports and imports have tended to ignore the simultaneous relationship between quantity and price. This paper investigates the price responsiveness of export and import demand and supply in eight African countries. The results indicate that export demand price elasticities are smaller when the sample is African. The import supply and demand elasticities were found to be generally large. The Marshall–Lerner condition of balance of payment stability is found to be easily satisfied. A positively sloped function of export supply is found to exist for a majority of countries in the sample. The average time lag of export supply is found to be about a year. The disequilibrium model is found to be more appropriate for import demand, import supply and export supply.     

Kalman filter and the demand for cigarettes

kalman filter estimates of price, income and advertising elasticities are presented. An analysis of structural change in the demand for cigarettes in the US for the period 1929–86 is made. Estimated price and income elasticities are generally smaller, and the advertising elasticity larger, than estimates previously found. Cigarette demand is inelastic with respect to price and income, and advertising elasticity is statistically insignificant for the most part. Furthermore, both income and price elasticities decline over time while advertising elasticity tends to rise. Four time periods where structural change has occurred are identified. The health scare reports and the Fairness Doctrine Act have a significant impact on per capita cigarette consumption.