Abstract
AbstractWe adopt an EASI model to estimate demand for omega-3, organic, cage-free, and conventional eggs in the United States. Our empirical framework accounts for demand inter-dependencies among these egg types, while allowing for unrestricted Engel curves, unobserved consumer heterogeneity, and a broader product and geographic coverage. We further address endogeneity of prices and expenditures and left-censoring induced by disaggregate data. Our results indicate that the demand for organic and cage-free eggs is price-elastic, while the demand for omega-3 and conventional eggs is price-inelastic. Additionally, we establish strong substitutability relationships between the eggs. Finally, we measure consumer welfare consequences of rising domestic egg prices brought by Japan’s egg import tariff reductions.
Highlights
Recent years have seen consumers develop affinity for vegetarian, organic, omega-3, cage-free, free-range, fertile, nutrient-enhanced, and other specialty eggs, which is believed to be brought by rising health consciousness and healthy lifestyles, increased awareness, and concern about animal welfare (Bakhtavoryan and Lopez, 2020; Grand View Research, 2019; Lusk, 2010)
We estimate a full system of the Exact Affine Stone Index (EASI) demand and reduced-form expenditure and price equations via the Full Information Maximum Likelihood (FIML)
The FIML procedure allows for contemporaneous correlation across the unobserved egg supply and demand determinants and accounts for the true simultaneity between the supply and demand factors of price determination mechanism
Summary
Recent years have seen consumers develop affinity for vegetarian, organic, omega-3, cage-free, free-range, fertile, nutrient-enhanced, and other specialty eggs, which is believed to be brought by rising health consciousness and healthy lifestyles, increased awareness, and concern about animal welfare (Bakhtavoryan and Lopez, 2020; Grand View Research, 2019; Lusk, 2010). The number of individuals in the United States consuming organic eggs increased by 14% over the span of 2014–2017, reaching 80.35 million (Statista Research Department, 2020). This market dynamic has gone hand-in-hand with a considerable expansion of production of specialty eggs in the United States, which reflects producer efforts to accommodate changing consumer egg preferences (American Egg Board, 2020; Grand View Research, 2019).
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