An Empirical Assessment of Endogeneity Issues in Demand Analysis for Differentiated Products
Posted: 12 Oct 2003
There are 2 versions of this paper
An Empirical Assessment of Endogeneity Issues in Demand Analysis for Differentiated Products
American Journal of Agricultural Economics, Vol. 85, Issue 3, pp. 605-617, 2003
Number of pages: 13
Posted: 02 Apr 2020
Abstract
This article explores the issue of price and expenditure endogeneity in empirical demand analysis. The analysis focuses on the U.S. 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.
Suggested Citation: Suggested Citation
Dhar, Tirtha and Chavas, Jean-Paul and Gould, Brian W., An Empirical Assessment of Endogeneity Issues in Demand Analysis for Differentiated Products. Available at SSRN: https://ssrn.com/abstract=418787
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