ON THE USE OF PRICE RATIO IN SUPPLY RESPONSE

Jean-Paul Chavas ()

No 278856, 1980 Annual Meeting, July 27-30, Urbana-Champaign, Illinois from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Because of a lack of data or multicollinearity problems, it is fairly common to include only a subset of the relevant prices in econometric model of supply response. This paper provides some evidence on the validity of using price ratios in this situation: A model of the U.S. poultry and egg industry where feed cost and output price are the only economic variables considered suggests that the use of price ratios would be inappropriate. If careful attention is given to model specification, it appears that homogeneity restrictions should not be imposed on supply response models unless the excluded prices are known to have little influence on production decisions.

Keywords: Farm; Management (search for similar items in EconPapers)
Pages: 29
Date: 1980-07
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea80:278856

DOI: 10.22004/ag.econ.278856

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