Bayesian Model Averaging in Consumer Demand Systems with Inequality Constraints

Chew Chua, William Griffiths () and Christopher O'Donnell

No 806, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: Share equations for the translog and almost ideal demand systems are estimated using Markov Chain Monte Carlo. A common prior on the elasticities and budget shares evaluated at average prices and income is used for both models. It includes equality restrictions (homogeneity, adding up and symmetry) and inequality restrictions (monotonicity and concavity). Posterior densities on the elasticities and shares are obtained; the problem of choosing between the results from the two alternative functional forms is resolved by using Bayesian model averaging. The application is to USDA data for beef, pork and poultry. Estimation of elasticities and shares, evaluated at mean prices and expenditure, is insensitive to model choice. At points away from the means the estimates are sensitive, and model averaging has an impact.

Keywords: conditional prior; Marginal likelihood; Metropolis-Hastings algorithm (search for similar items in EconPapers)
JEL-codes: C11 C32 E21 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Bayesian Model Averaging in Consumer Demand Systems with Inequality Constraints (2001)
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