A Microeconometric Analysis of Consumer Taste Determination and Taste Change for Beef

Abstract

A new method for modeling determination of consumer taste and a test of the taste‐change hypothesis is presented. Taste varies across households because of differences in household characteristics. The method has a Multiple Indicator and Multiple Cause model interpretation, with taste as an unobserved variable. Taste indicators are residuals of regular household demand functions, the factors unexplained by prices and household expenditures. Taste‐cause variables are household characteristics and other variables. The proposed model is applied to U.S. beef demand using household data. Results show that structural taste changes, unexplained by changes in demographic composition, decreased 8% from 1977 to 1987.

Keywords: beef demand, consumer taste, household consumption, latent variable, D120, Q110