Using econometric modelling to predict demand for fluid and farm milk: A case study from Turkey

Abstract

The paper examines the demand for both farm milk (unpacked fluid milk), produced without safely controls, and fluid milk (packed fluid milk), produced under fluid milk technology such as pastorization or UHT, based on the data from a household survey which was carried out in İzmir, the third largest city in Turkey. İzmir households consume 6.7 kg/month farm milk and 5.6 kg/month fluid milk, 12.3 kg/month in total. We conducted an analysis using a Heckman selection model since selection bias was potentially an important problem in this study. Heckman estimations for farm milk and fluid milk were used to check whether Heckman correction was required for each type of milk. The Heckman analysis yielded own price elasticities as −0.18 and −0.16 for fluid milk and farm milk, respectively. Fluid milk consumers consider farm milk as a substitute while farm milk consumers do not see fluid milk as a substitute. According to our results, İzmir consumers tend to prefer farm milk to a large extend.