The effects of U.S. shrimp imports on the Gulf of Mexico dockside price : a source differentiated mixed demand model

Abstract

The ever increasing demand for the shrimp products in the 1980s and 1990s caused the volume of shrimp imports to increase. The import of shrimp has had an upward trend, from 847 million pounds in 1997 to 1,636 million pounds in 2010.The imports price has declined since 1997. Along with the decrease in imports price, the U.S. domestic shrimp price has also declined. However, the annual production of shrimp from the Gulf of Mexico has, in the long-run, remained relatively stable. These facts indicate that there is not the same quantity-price relation between the U.S. domestic shrimp market and shrimp imports market. Therefore, an ordinary demand or an inverse demand can only demonstrate one aspect of demand behavior either the quantities consumed are a function of prices or the prices are a function of quantities demanded, and are not able to respond in a more complicated system of demand. The basic objective of this dissertation is to determine a closer approximation of the effects of events in the real U.S. shrimp demand market. To accomplish this objective, a mixed demand system was adopted. A mixed set of demand functions contains both coefficients of a regular demand system and of an inverse demand system (Barton, 1989). This study adopts the Brown and Lee parameterization (2006), known as the mixed Rotterdam demand system. The shrimp products were divided into two subgroups: 1) shrimp imports (group a); and 2) Gulf of Mexico shrimp landings (group b). Countries considered in the analysis include China, Ecuador, India, Indonesia, Mexico, Thailand, Vietnam, and a final category includes all other exporting countries ans named as “Other Countries.” Demand for Gulf shrimp is specified by size of shrimp with three sizes: Large, Medium, and Small. The U.S. imports from these countries were modeled in a quantity dependent framework, while demands for domestic shrimp products were modeled in a price dependent framework. The summary statistics and estimated results for the model parameters indicate that Thailand has the largest share and largest marginal share among all exporting countries and Gulf shrimp landings. As theoretically expected, all own-price elastisities of regular demand are negative, implying an inverse relation between the quantity of imports from a selected country and its price of imports. Among all countries, China, India, Mexico, and Vietnam have the largest and almost the same own-price elasticities (-0.40). Thailand’s own-price elasticity is smaller than these countries, although it has