Analytical Problems and Suggestions in the Analysis of Behavioral Economic Demand Curves

Abstract

Behavioral economic demand curves (Hursh, Raslear, Shurtleff, Bauman, & Simmons, 1988) are innovative approaches to characterize the relationships between consumption of a substance and its price. In this article, we investigate common analytical issues in the use of behavioral economic demand curves, which can cause inconsistent interpretations of demand curves, and then we provide methodological suggestions to address those analytical issues. We first demonstrate that log transformation with different added values for handling zeros changes model parameter estimates dramatically. Second, demand curves are often analyzed using an overparameterized model that results in an inefficient use of the available data and a lack of assessment of the variability among individuals. To address these issues, we apply a nonlinear mixed effects model based on multivariate error structures that has not been used previously to analyze behavioral economic demand curves in the literature. We also propose analytical formulas for the relevant standard errors of derived values such as P max, O max, and elasticity. The proposed model stabilizes the derived values regardless of using different added increments and provides substantially smaller standard errors. We illustrate the data analysis procedure using data from a relative reinforcement efficacy study of simulated marijuana purchasing.