When are Supply and Demand Determined Recursively Rather than Simultaneously? Another look at the Fulton Fish Market Data

Kathryn Graddy () and Peter E Kennedy

No 6053, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: When a supply and demand model is recursive, with errors uncorrelated across the two equations, ordinary least squares (OLS) is the recommended estimation procedure. Supply to a daily fish market is determined by the previous night’s catch, so this would appear to be a good example of a recursive market. Despite this, data from the Fulton fish market are treated in the literature, without explanation, as coming from a simultaneous-equations market. We provide the missing explanation: inventory changes, influenced by current price, affect daily supply. Instrumental variable estimates using the full data set differ very little from OLS estimates using only observations with little inventory change, providing strong support for our explanation. Finally, we note that because of inventory changes, estimates of supply price elasticities in high-frequency markets must be interpreted with care.

Keywords: demand; estimation; fish; Fulton market; inventories; simultaneous equations (search for similar items in EconPapers)
JEL-codes: C3 L6 (search for similar items in EconPapers)
Date: 2007-01
View list of references

Downloads: (external link)
http://www.cepr.org/pubs/dps/DP6053.asp (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: When are Supply and Demand Determined Recursively Rather than Simultaneously? Another look at the Fulton Fish Market Data (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cpr:ceprdp:6053

Ordering information: This working paper can be ordered from
http://www.cepr.org/pubs/dps/DP6053.asp

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers
Address: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Series data maintained by ().