An application of maximum entropy estimation: the demand for meat in the United Kingdom

Iain Fraser

Applied Economics, 2000, vol. 32, issue 1, 45-59

Abstract: In many econometric studies of demand relationships the design matrix is frequently subject to severe collinearity. In this paper the Generalized Maximum Entropy methodology is introduced and used to estimate a set of demand relationships. The ability of Generalized Maximum Entropy to estimate economic relationships that are typically subject to a high degree of collinearity among the explanatory variables, thus potentially causing traditional methods of estimation to be unreliable, is explained. The results derived by this alternative method of estimation, for a UK meat demand data set, are analysed and examined. The potential for this emerging estimation methodology is discussed.

Date: 2000
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DOI: 10.1080/000368400322976

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