U.S. Canned Tuna Supply and Demand

Abstract

A 3SLS econometric model is used to estimate price elasticities of supply and demand for domestically produced and imported canned tuna in the U.S. market. In addition, a VAR model is developed to examine the relations between imports and domestically produced canned tuna. For domestically produced canned tuna, a 3SLS estimation of a structural econometric model yielded a coefficient for price elasticity of supply of 0.2 and of own-price demand of ?0.3. Such price inelasticities are expected of a fishery exploited at or near its maximum yields (inelastic supply), and a consumer product widely viewed as almost a necessity in a well-stocked pantry (inelastic demand). In addition, the model yielded a cross-price elasticity of demand with respect to the price of imported canned tuna of 0.45. Additional results include an income elasticity U.S. demand for domestically packed tuna of 0.83; a cross-price elasticity with the price of bread (a complement) of ?0.33, a cross-price elasticity for the price of ground meat (a substitute) of 0.30. With respect to imported canned tuna in the U.S. market, the corresponding elasticities estimated in the model are ?1.3 (own-price demand), 3.5 (income elasticity), ?1.2 (cross-price with the price of bread) and 2.5 (cross-price with the price of ground meat).

For canned tuna company managers, the results provide useful information about the likely effects on sales that would come from their own price changes, from changes in the price of imported canned tuna, and from price changes in the markets for complementary and substitute products. They can also use our results in discussions with U.S. trade negotiators, who are frequently faced with disputes over tariffs, market access, and other trade issues.     

Demand for dairy products in Mexico

Mexico is the world's largest importer of non-fat dry milk (NFDM) and imports of cheese, fluid milk, and whey have increased rapidly in the past four years. In the wake of GATT and the NAFTA, as well as recent economic developments in Mexico, world dairy markets will be affected as a result of changes in the Mexican dairy sector. The study analyzes both domestic and import demand for dairy products in Mexico to determine price and income elasticities as well as import elasticities. The results indicate that the demand for fluid milk is the most responsive to price changes and NFDM demand is inelastic with respect to its own price. There is little subtitution between fluid milk and non-fat dry milk, although fluid milk is relatively elastic, which suggests the existence of other substitutes for fluid milk. Estimation of import demand equations reveal similar trends in response to price changes, but income elasticity of imports was highest for fluid milk which suggests that Mexico will import possibly more fluid than dry milk as incomes rise. The exchange rate was the most significant variable influencing all dairy product imports.     

An Econometric Analysis of Total (Domestic) and Import Demand for Beef in Hong Kong

This paper presents an applied econometric analysis of total (domestic and import) demand for beef in Hong Kong for the period 1970 to 1988. The estimates are in logarithmic form and provide elasticity estimates for beef demand (domestic and import) in Hong Kong. Variables in the estimated domestic demand models (per capita and aggregate) include own price, prices of a substitute (pork) and a complement (rice) and income. Variables in the estimated import demand model include demand side variables (price of beef, price of pork, price of rice and income) and the price of imported live cattle as a supply shifting variable. The elasticities were inelastic for the domestic demand models while most of those for the import demand model were elastic.     

Derived Demand and Relationships between Prices at Different Levels in the Value Chain: A Note

In this paper we note that when there is only one variable factor in the intermediaries' production technology, prices at different levels in the value chain will move proportionally to each other over time. This is also the only general condition under which the elasticity of price transmission is equal to one, so that retail price signals are perfectly transmitted to primary product producers and vice versa. This allows a test of whether derived demand elasticities contain information about consumer elasticities using only prices. An empirical illustration is provided using data from the Norwegian cod sector.     

Estimation of trade elasticities in the presence of trade barriers, multinationals and imperfect competition

Recent research highlights the role that multinational trading companies may play in impeding price transmission. In markets characterised by imperfect competition, an estimate of the partial elasticity of demand may be of limited practical value if no account is taken of the reaction of competitors. In this paper, we demonstrate the potential for market structure to affect price transmission and trade elasticities, and challenge the presumption that only government intervention can impact upon price transmission, with examples supporting why theory would suggest otherwise.     

Demand for animal‐derived food in selected Asian countries: A system‐wide analysis

Food consumption patterns in Asia show a trend away from staples toward high protein food derived from animal and dairy products, fruit and vegetables, fats and oils. Such changes in food consumption patterns are due to rising incomes, urbanization, globalization, and modernization of marketing infrastructure. In this article, we analyze the demand for the animal‐derived food group comprising meat (chicken, beef, pork, and mutton), eggs and fish, and derive income and price elasticities in seven Asian countries using the system‐wide approach. Demand homogeneity and Slutsky symmetry properties were tested and found to be compatible with the data. Our findings reveal that animal‐derived food as a group is a necessity (except in Taiwan) and its demand is price inelastic (except in Taiwan and Sri Lanka). The implied unconditional demand elasticities reveal that, in all countries (except beef in Japan and Taiwan), chicken, beef, pork, mutton, eggs and fish (except in Taiwan) are all necessities and the demand for all types of animal‐derived food in all seven countries are mostly price inelastic. The cross‐price elasticity estimates are mostly found to be positive, meaning that there is a higher degree of substitutability between chicken, beef, pork, mutton, eggs, and fish.     

Strategic pricing in a differentiated product oligopoly model: fluid milk in Boston

In an imperfectly competitive industry, differentiated products compete with each other with price rather than quantity as the strategic variable. Several previous studies have employed a generalized Nash–Bertrand model: Liang (1989) , Cotterill (1994) , Cotterill et al. (2000) , and Kinoshita et al. (2002) ; however, only Liang has explored the theoretical foundations of that model. This article generalizes the Liang two‐good model to three goods. A surprising and important result follows. Price‐conjectural variations do not exist in models with three or more goods. Price‐reaction functions, however, exist in multiple‐good models. We estimate them jointly with a brand‐level demand system to evaluate the total impact of a brand manager's price change on own quantity. In a differentiated product market, this is a useful addition to a partial demand elasticity approach, because a change in one brand's price typically engenders a price reaction by other brands that affects own quantity via substantial cross‐price elasticities among substitutes. Strategic pricing in the Boston fluid milk market was also influenced by the existence of a raw milk price support program, the Northeast Dairy Compact. We find that the advent of the Compact was a focal point event that crystallized a shift away from Nash–Bertrand to more cooperative pricing. If the downstream market is not competitive, one needs to consider strategic price reactions when designing and evaluating agricultural price programs.     

THE DEMAND FOR INPUTS AND THE AGGREGATE SUPPLY FUNCTION FOR AGRICULTURE*

This paper presents a theoretical derivation of aggregate supply elasticities from the relevant input demand elasticities. By way of illustration, an estimate of the aggregate supply elasticity with respect to product price for United Kingdom agriculture is calculated. In addition, the paper investigates the supply function that is implied by input demand functions which contain a geometrically declining lag distribution. The paper concludes by suggesting that the indirect estimation of aggregate supply elasticities may well be preferable to direct estimation of the elasticities.     

Variability in wheat export demand elasticity: Policy implications

Agricultural economists and policy makers in the United States believe that the magnitude of the export demand elasticity is one of the most important parameters used in farm policy decisions. However, past empirical estimates show wide variation in the size of the U.S. export demand elasticity. Reasons for this wide variation go beyond differences in model specification, estimation methods, and period of estimation to involve factors such as trade policies and changes in the supply and demand conditions of foreign countries. In view of the continual variation in magnitude, the elasticity of export demand should be viewed as a variable rather than as a parameter. In this study, U.S. wheat export demand elasticities are computed using a world wheat trade model. The estimates show that the elasticities vary significantly over time. They also reveal that elimination of trade barriers would more than double wheat export demand elasticities.     

Price elasticity of water allocations demand in the Goulburn–Murray Irrigation District*

Bid prices for the demand and supply of water allocations between 2001 and 2007, and average monthly prices paid for water allocations from 1997 to 2007 in the Goulburn–Murray Irrigation District are analysed to estimate price elasticities. Based on bid prices, the price elasticity of demand for water allocations appears highly elastic, with elasticities strongly influenced by the season and drought. The price elasticity of supply for water allocations is also elastic, albeit less elastic than demand. Using actual prices paid, water demand is negatively related to price and is inelastic, and appears to be most influenced by demand the previous month, drought and seasonality factors.     

Quasi- and Simulated-Likelihood Approaches to Censored Demand Systems: Food Consumption by Food Stamp Recipients in the United States

A quasi-maximum-likelihood estimator is proposed and applied to a censored Translog demand system for foods, using a sample of food stamp recipients in the United States. The procedure produces remarkably close parameter and elasticity estimates to those of the simulated-maximum-likelihood procedure. A two-step procedure is also considered but it produces different elasticities. Demands are found to be price elastic for pork and fish but price inelastic for all other food products. Gross complementarity and net substitutability are obvious but these cross-price effects are much less pronounced than own-price and total food expenditure effects.     

Alternative Methods for Estimating Price Elasticities of Imports

Abstract

This article compares three commonly-used methods for estimating import price elasticities: (1) trade-weighted price elasticities of domestic demand and supply along with price transmission; (2) direct estimates based on ad hoc import demands; and (3) Armington model estimates. Using data from El Salvador's grain markets (white maize, red beans, and rice), the results indicate that the second method provides the most reliable estimates and that the Armington procedure may not be appropriate for estimations of this type. However, the first method offers the best guesstimates to assess potential rather than historical import response as trade is liberalized.     

THE ELASTICITY OF DEMAND FOR THE EXPORTS OF A SINGLE COUNTRY — A RECONSIDERATION

One country's exports of a particular commodity are usually imperfect substitutes for similar exports from other countries. Consequently, the price elasticity of export demand involves unknown cross elasticities between sub-groups of the commodity. However, there are constraints on the relative magnitudes of all the sub-group elasticities. These make it possible to assess the degree to which the whole commodity elasticity divided by the market share is an over-estimate of the export elasticity.     

The Demand for Organic and Conventional Produce in London,UK: A System Approach

The majority of studies on consumer demand for organic products neglect the presence of non‐organic competitors, ignoring their effect on consumer demand for organics. This article uses a demand system which includes both organic and non‐organic fruits and vegetables, with actual (as opposed to stated) data for household purchases. Estimation of our model provides empirical evidence on the interrelationships between organic and non‐organic products, as the relevant cross‐price elasticities. Own‐price elasticities indicate that organic fruits and vegetables are more price elastic than their non‐organic counterparts, and that lower social class households with children have the most own‐price elastic demand. Cross‐price elasticities indicate relatively strong loyalty to organic products.     

Food demand elasticities for Australia

There is renewed interest in robust estimates of food demand elasticities at a disaggregated level not only to analyse the impact of changing food preferences on the agricultural sector, but also to establish the likely impact of pricing incentives on households. Using data drawn from two national Household Expenditure Surveys covering the periods 1998/1999 and 2003/2004, and adopting an Almost Ideal Demand System approach that addresses the zero observations problem, this paper estimates a food demand system for 15 food categories for Australia. The categories cover the standard food items that Australian households demand routinely. Own‐price, cross‐price and expenditure elasticity estimates of the Marshallian and Hicksian types have been derived for all categories. The parameter estimates obtained in this study represent the first integrated set of food demand elasticities based on a highly disaggregated food demand system for Australia, and all accord with economic intuition.     

A Meta‐Analysis on the Elasticity of Demand for Pesticides

There is an increasing policy interest in pesticide taxation schemes as a measure to reduce harmful effects of pesticide use. The effectiveness of such tax depends, however, on the price elasticity of demand for pesticides. Moreover, information on these demand elasticities and their determinants is of crucial relevance for policy‐making and normative modeling approaches. In this article, we present a meta‐analysis based on studies that have estimated pesticide demand elasticities in Europe and North America. Our meta‐analysis reveals that the own‐price elasticities of demand for pesticides are, with a median of ?0.28, significantly smaller than zero, but also significantly larger than ?1, i.e. to be inelastic. We find that the demand for pesticides for special crops is less elastic than that for arable and grassland. In addition, the demand for herbicides is more elastic than for other pesticides. Studies that consider only short‐term horizons and little flexibility for farmers to adjust to price changes generate significantly less elastic pesticide demands. The results also indicate that more recent studies identify lower pesticide price elasticities of demand. Furthermore, we find that peer‐reviewed studies tend to find more inelastic results compared to grey literature.     

Demand for meat and dairy products by Turkish households: a Bayesian censored system approach

We extend the Tobit (censored) linear equation system procedure to utility‐theoretic demand functions, along with a mapping mechanism to impose the adding‐up restriction implied by consumer utility maximization theory—a theoretical restriction very often ignored in previous empirical studies with censored demand systems. In this context, the Bayesian Markov Chain Monte Carlo (MCMC) procedure is applied to the censored linear approximate almost ideal demand system (LAIDS) for 12 food products, using data from the Turkish Household Expenditure Survey. All own‐price elasticities are negative and expenditure elasticities positive. Uncompensated own‐price elasticities for rural households are generally much higher than those for their urban peers, though demand for most food products are own‐price elastic for both types of households. The differential patterns in demand elasticities between urban and rural households become even more evident (almost twice) as relatively more expensive foodstuffs are consumed, showing that accessibilities to alternative products have made rural Turkish households more cognizant toward price changes in foods. Household characteristics play a key role in food expenditures, notably so in urban areas, and regional and seasonal differences are also present.     

AGRICULTURAL EXPORTS OF DEVELOPING COUNTRIES: ESTIMATES OF INCOME AND PRICE ELASTICITIES OF DEMAND AND SUPPLY

This paper provides new evidence on income and price elasticities of demand and supply of agricultural exports from developing countries, on the basis of (a) a consistent and fully specified supply and demand model, and (b) statistical estimation procedures not frequently used in the estimation of agricultural export functions. Estimates of price and income elasticities of demand for aggregate agricultural exports for all developing countries taken together — as distinct from individual exporting countries — are found to be low; moreover, export price as distinguished from non-price factors plays a relatively insignificant role in increasing export supply. Hence, an attempt by all developing countries to expand traditional agricultural exports with low price elasticity of demand may not yield rising earnings for all; but in fact may result in falling export revenues. Insofar as individual exports of all developing countries (not individual countries) are concerned, income and price elasticities of demand for such tropical commodities as tea, coffee, cocoa and bananas are also found to be low, except for new, non-traditional exports like pineapples. This indicates the importance of diversification of agricultural exports as a vehicle for their future growth.     

沈阳市城镇居民生活用水需求影响因素分析

利用时序数据及沈阳市康平县城镇居民生活用水的截面数据,对沈阳市城镇居民生活用水需求的影响因素进行实证分析,估计其需求价格弹性、需求收入弹性及需求教育弹性。估计结果明显有别于其他地区的研究结果,建议沈阳市应根据城镇居民生活用水水价偏低、收入弹性较大的实际,同时考虑到居民的承受力,调高水价时采用递增的阶梯式水价或补贴低收入用水户等政策,合理发挥价格杠杆的作用,同时还应注意到负的需求教育弹性,加强对居民的节水宣传教育。     

THE SHORT-RUN IMPACT OF BEEF IMPORTS ON U.S. MEAT PRICES

This paper contains short-run estimates of the impact of beef imports from Australia and elsewhere on U.S. retail meat prices. The U.S. beef demand is separated into two categories, table cuts and processed items. Estimates of direct and cross price elasticities of demand for these products are used together with elasticity estimates for other meats and other foods to assess the effect of imports on prices and upon various portions of the Consumer Price Index.