An Econometric Analysis of Price Dynamics in the Presence of a Price Floor: The Case of American Cheese

Jean-Paul Chavas () and Kwansoo Kim

Journal of Agricultural and Applied Economics, 2005, vol. 37, issue 1, 21-35

Abstract: In this paper, we present an econometric analysis of the effects of a price floor on price dynamics and price volatility. A price floor (implemented as a part of government pricing policy) provides a censoring mechanism for price determination. We specify and estimate a dynamic Tobit model under time-varying volatility. The model is applied to analyze the effects of a price support program on price dynamics and price volatility in the U.S. American cheese market. The econometric analysis provides useful insights on price dynamics in the presence of a government-determined price floor.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jagaec:v:37:y:2005:i:01:p:21-35_00

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