Estimating censored and non homothetic demand systems: the generalized maximum entropy appoach

Fabienne Femenia and Alexandre Gohin ()
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Alexandre Gohin: ESR - Unité de recherche d'Économie et Sociologie Rurales - INRA - Institut National de la Recherche Agronomique

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Abstract: The econometric estimation of zero censored demand system faces major difficulties. The virtual price approach pioneered by Lee and Pitt in an econometric framework is theoretically consistent but empirically feasible only for homothetic demand system and even may fail to converge depending on initial conditions. In this paper we propose to expand on this approach by relying on the generalized maximum entropy concept instead of the Maximum Likelihood paradigm. The former is robust to the error distribution while the latter must stick with a normality assumption. Accordingly the econometric specification of censored demand systems with virtual prices is made easier even with non homothetic preferences defined over several goods. Illustrative Monte Carlo sampling results show its relative performance.

Keywords: CENSORED DEMAND SYSTEM; VIRTUAL PRICE; GENERALIZED MAXIMUM ENTROPY (search for similar items in EconPapers)
Date: 2007
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-02814735v1
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Published in 9. Annual Conference on Global Economic Analysis, 2007, Purdue, United States. 24 p

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Related works:
Working Paper: Estimating censored and non homothetic demand systems: the generalized maximum entropy approach (2009)
Working Paper: Estimating censored and non homothetic demand systems: the generalized maximum entropy approach (2009)
Working Paper: Estimating censored and non homothetic demand systems: the generalized maximum entropy approach (2007)
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