A Branching AIDS Model for Estimating U.S. Postal Price Elasticities

Lyudmila Y. Bzhilyanskaya (), Margaret M. Cigno () and Edward S. Pearsall ()
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Lyudmila Y. Bzhilyanskaya: U.S. Postal Regulatory Commission (PRC)
Margaret M. Cigno: U.S. Postal Regulatory Commission (PRC)

A chapter in Postal and Delivery Innovation in the Digital Economy, 2015, pp 91-113 from Springer

Abstract: Abstract In this paper we apply an econometric method based upon the Almost Ideal Demand System (AIDS) originally developed by Deaton and Muellbauer (1980) and extended by Hausman et al. (1994) to estimate a series of complete matrices of price elasticities for U.S. Postal Service (USPS) domestic mail. Our model organizes USPS revenues, volumes and prices as a tree with branches corresponding to increasing disaggregations of U.S. domestic mail by class, by rate category and by shape. The matrices of price elasticities apply to the levels of disaggregation as we proceed up the tree. Our results demonstrate that modern econometric methods are capable of producing complete matrices of postal price elasticities at a level of detail and accuracy that is beyond the capabilities of conventional methods.

Keywords: Price Elasticity; Revenue Share; Share Equation; Average Revenue; Exponential Trend (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:topchp:978-3-319-12874-0_8

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DOI: 10.1007/978-3-319-12874-0_8

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