A censored system of demand analysis to unpacked and prepackaged milk consumption in Turkey

Abstract

The market driven and globally integrated economy since 1980 in Turkey has boosted milk demand like any other foods. We estimate the impacts of factors affecting households unpacked and prepackaged fluid milk demand in Turkey using a bivariate censored system of demand model. The correlation coefficient from bivariate censored model between these two products indicates that unobservable factors influencing the unpacked fluid milk would likely and significantly lower the consumption of the packed fluid milk for a household. The model also reveals that non-economic demographic factors play crucial roles in determining the quantity demanded of both products, especially the unpacked fluid milk. Both products are substitute one for another and both products are price elastic, suggesting that, for example, more than a change observed in the unpacked milk price would occur in the demand for the unpacked fluid milk with an increase or decrease in the unpacked fluid milk commodity prices. Interestingly, the unpacked fluid milk is an inferior good, while the prepackaged fluid milk is an normal good, indicating that the demand for the packed fluid milk increases with the increased in household income. Milk industries can generate additional revenues by decreasing both product prices.