The Stochastic Specification of Demand Share Equations Restricting Budget Shares to the Unit Simplex

Jane M. Fry, Tim R. L. Fry and Keith R. McLaren

No 267407, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: The traditional approach to estimating systems of share equations is to append a multivariate normal stochastic component to the deterministic component. The aggregation restrictions are then exploited to delete one equation and estimation is then carried out by maximum likelihood. Such an approach does not exploit the aggregation restrictions to their full extent, as there remains a non-zero probability of shares being negative or greater than unity. In this paper -we take an approach, compositional data analysis, and a distribution familiar to statisticians, the additive logistic normal, and apply them to the estimation of a system of demand share equations. The results of this new approach are then compared to those of the traditional approach.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 38
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/267407/files/monash-151.pdf (application/pdf)
https://ageconsearch.umn.edu/record/267407/files/monash-151.pdf?subformat=pdfa (application/pdf)

Related works:
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: https://EconPapers.repec.org/RePEc:ags:monebs:267407

DOI: 10.22004/ag.econ.267407

Access Statistics for this paper

More papers in Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().