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BAYES' ESTIMATES OF THE DOUBLE HURDLE MODEL IN THE PRESENCE OF FIXED COSTS

Garth Holloway (), Christopher Barrett () and Simeon K. Ehui

No 14741, Working Papers from Cornell University, Department of Applied Economics and Management

Abstract: We present a model of market adoption (participation) where the presence of non-negligible fixed costs leads to non-zero censoring of the traditional double-hurdle regression. Fixed costs arise due to household resources that must be devoted a priori to the decision to participate in the market. These costs-usually a cost of time-motivate two-step decision-making and focus attentions on the minimum-efficient scale of operations (the minimum amount of milk sales) at which market entry becomes viable. This focus, in turn, motivates a non-zero-censored Tobit regression estimated through routine application of Markov chain Monte Carlo Methods.

Keywords: Financial; Economics (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ags:cudawp:14741

DOI: 10.22004/ag.econ.14741

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