Getting Something from Nothing: An Investigation of Beef Demand Expansion and Substitution

Abstract

A relative increase in demand for one type of beef can have one of two potentially countervailing effects: it can cause substitution of one type for another and/or it might expand overall demand. The results of a random parameters logit analysis indicate that regardless of whether USDA Choice or upgraded steak demand increases, the expansion effect dominates the substitution effect. We also show that, for our sample of consumers, the introduction of a new “natural” steak causes a greater reduction in market share for USDA Choice beef than ungraded beef. Despite this result, however, overall steak demand increases.