An Empirical Assessment of Endogeneity Issues in Demand Analysis for Differentiated Products

Tirtha Dhar (tdhar@uoguelph.ca), Jean-Paul Chavas (jchavas@wisc.edu) and Brian W. Gould

No 201561, Working Papers from University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group

Abstract: The paper explores the issue of price and expenditure endogeneity in empirical demand analysis. The analysis focuses on the US carbonated soft drink market. We test the null hypothesis that price and expenditures are exogenous in the demand for carbonated soft drinks. Using an Almost Ideal Demand System (AIDS) specification, we strongly reject exogeneity for both prices and expenditures. We find that accounting for price/expenditures endogeneity significantly impacts demand elasticity estimates. We also evaluate the implications of endogeneity issues for testing weak separability.

Keywords: Food Consumption/Nutrition/Food Safety; Research and Development/Tech Change/Emerging Technologies; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 44
Date: 2002
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Citations: View citations in EconPapers (38)

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Working Paper: An Empirical Assessment of Endogeneity Issues In Demand Analysis for Differentiated Products (2002)
Working Paper: An Empirical Assessment of Endogeneity Issues In Demand Analysis for Differentiated Products (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwfswp:201561

DOI: 10.22004/ag.econ.201561

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