Cross-price Elasticities Of Demand Research Articles

Behavioral economic relationship between cannabis and cigarettes: Evidence from hypothetical purchase tasks.

In the United States (U.S), cannabis policies have been increasingly liberalized whereas tobacco policies have been increasingly stringent. Given the high prevalence of cannabis and tobacco dual use, there are concerns that a policy regulating one substance may unintendedly influence the other. This study examined the responsiveness of the demand for cannabis joints and cigarettes when price varied. The study included 338 adult participants (21+) who used both cannabis and tobacco and lived in one of the U.S. states with recreational cannabis legalized by the time of interview in 2019. They completed hypothetical purchase tasks to indicate the quantity desired of cannabis joints and cigarette packs 1) when only one substance was available with escalating prices and 2) when both substances were concurrently available with escalating prices of cannabis joints and a fixed price of cigarette packs. We estimated 1) the own-price elasticity of demand for each substance using nonlinear exponential demand model, and 2) the cross-price elasticity of demand at aggregate level using nonlinear exponential demand model and at individual level using log-linear demand model. The estimates for the rate of change of own-price elasticity (α) were 0.0011 (SE=0.000039, p<0.001) for cannabis joints and 0.00095 (SE=0.000037, p<0.001) for cigarette packs. The aggregate-level estimates of cross-price elasticity (I=13.032, SE=0.34, p<0.001; β=0.0029, SE=0.0021, p>0.05) suggest an independent relationship between the two substances. At individual level, 78.70% of the participants treated the two substances as independent, 17.46% as complements, and 3.85% as substitutes. For most adults who used both cannabis and tobacco in the U.S., cannabis joints and cigarettes had an independent relationship. Policies regulating the price of cannabis may not have large unintended consequences on cigarette use.

Estimation of the profit function of Trans log and the elasticity of input demand in rice farming in Jambi province

This study aims to analyze the development of input and output prices, the translog profit function, and the elasticity of demand for lowland rice farming inputs in Jambi Province. The function model used is the Transcendental Logarithmic (Translog) profit function. The study results show that · The development of input prices has increased significantly every year. · The production input factors that affect the profitability of lowland rice farming are the price of seeds, TSP fertilizer, and other chemical fertilizers (KML). Other production factors such as urea fertilizer prices, pesticide prices, labor wages, and land rental costs are determinant factors. · The value of the elasticity of demand for inputs to their prices is elastic. All cross-price elasticity of demand is complementary and elastic. The value of the elasticity of input demand which is influenced by the price of rice shows a positive and elastic value. From the results of the study, it is expected that there will be capital assistance for farmers so that farmers can allocate optimal use of inputs.

Impact of plant-based meat alternatives on cattle inventories and greenhouse gas emissions

New plant-based meat (PBM) alternatives that aim to mimic the taste and texture of beef could have significant economic, environmental, and animal welfare impacts if they replace traditional animal-based meats and reduce livestock production. Whether PBM alternatives can achieve these ends depends on the extent to which consumers are willing to substitute for PBM alternatives, the structure of the meat industry, and the inter-linkages of the livestock industry with the other parts of the economy. We construct and calibrate an economic model to estimate how a reduction in PBM prices, or increase in demand for PBM, in the United States affects cattle production. For every 10% reduction in price or increase in demand for PBM, we estimate U.S. cattle production falls approximately 0.15%, U.S. cattle producers’ economic welfare falls by $300 million year−1, and U.S. consumer welfare rises by $513 million year−1. Key variables affecting model outcomes include the supply elasticity of cattle, the share of the total cost of cattle used to produce ground beef, and cross price-elasticity of demand between PBM and ground beef. Increases in U.S. demand for PBM alter trade patterns, leading to a reduction of beef imports and an increase in beef exports, a phenomenon that further reduces global greenhouse gas emissions and land use given the relative efficiency of U.S. beef production. For every 10% reduction in the price of PBM alternatives, we estimate that the global reduction in emissions is equivalent to 0.34% of U.S. emissions from beef production and 1.14% when including reduced land-use change emissions. Even substantial reductions in prices of PBM alternatives are unlikely to have substantive impacts on the U.S. cattle population and emissions, suggesting the need to also pursue alternative mitigation strategies, such as innovations to reduce the methane emissions per head.

Impact of the Seattle Sweetened Beverage Tax on substitution to alcoholic beverages.

IntroductionTaxes are increasingly used as a policy tool aimed at reducing consumption of sugar-sweetened beverages (SSBs), given their association with adverse health outcomes including type 2 diabetes, obesity and cardiovascular disease. However, a potential unintended consequence of such a policy could be that the tax induces substitution to alcoholic beverages. The purpose of this study is to examine the impact of the $0.0175 per ounce Seattle, Washington, Sweetened Beverage Tax (SBT) on volume sold of alcoholic beverages.MethodsA difference-in-differences estimation approach was used drawing on universal product code-level food store scanner data on beer (N = 1059) and wine (N = 2655) products one-year pre-tax (February-November, 2017) and one and two-years post-tax (February-November, 2018 and 2019) with Portland, Oregon, as the comparison site.ResultsAt two-years post-tax implementation, volume sold of beer in Seattle relative to Portland increased by 7% (ratio of incidence rate ratios [RIRR] = 1.07, 95% CI:1.00,1.15), whereas volume sold of wine decreased by 3% (RIRR = 0.97, 95% CI:0.95,1.00). Overall alcohol (both beer and wine) volume sold increased in Seattle compared to Portland by 4% (RIRR = 1.04, 95% CI:1.01,1.07) at one-year post-tax and by 5% (RIRR = 1.05, 95% CI:1.00,1.10) at two-years post-tax. The implied SSB cross-price elasticities of demand for beer and wine, respectively, were calculated to be 0.35 and -0.15.ConclusionsThere was evidence of substitution to beer following the implementation of the Seattle SSB tax. Continued monitoring of potential unintended outcomes related to the implementation of SSB taxes is needed in future tax evaluations.

Trading mechanism and pricing strategy of integrated energy systems based on credit rating and Bayesian game

In the integrated energy market, monitoring and managing the irregularities of market members is the key to ensuring efficient and stable of the market. This paper focuses on a multi-energy market in which the energy hub (EH) as a retailer purchases electricity from the main network and sells electricity and heat to energy users. We use a credit rating model based on Fisher discriminant analysis to evaluate the credit of the EH and set up three levels of punishment to punish the irregularities in trading. Furthermore, we establish a Bayesian game to model and analyze price strategy for EH. The cross-price elasticity of demand is a private information and serve as the type of EH. Each EH estimates the others’ prices and chooses the optimal price strategy that maximizes the expected benefits. Finally, real data are adopted to evaluate the proposed model.

Direct and cross price elasticities of demand for gasoline, diesel, hybrid and battery electric cars: the case of Norway

AimThe primary goals of this research is (i) to derive direct and cross demand market response functions for automobile powertrains and their energy carriers and (ii) to assess how CO2 emissions from automobiles depend on vehicle and energy pricesMethodsThe market demand for automobiles with differing powertrains is studied by means of a discrete choice model. Statistically precise coefficient estimates are calculated by means of a highly disaggregate data set consisting of virtually all 1.8 million new passenger car transactions in Norway during 2002–2016. Having estimated the model, we derive market response parameters in the form of direct and cross price elasticities of demand for gasoline, diesel, ordinary hybrid, plug-in hybrid and battery electric cars.ResultsThe own-price elasticity of gasoline driven cars is estimated at −1.08, and those of diesel driven, battery electric and plug-in hybrid electric cars at –0.99, −1.27 and −1.72, respectively, as of 2016 in Norway. The cross price elasticities of demand for gasoline cars with respect to the price of diesel cars, and vice versa, are estimated at 0.64 and 0.51, while the cross price elasticities of demand for battery electric cars with respect to the prices of gasoline and diesel driven cars come out at 0.36 and 0.48, respectively. A 1 % increase in the price of liquid fuel in general is found to reduce the average type approval rate of CO2 emission from new passenger cars by an estimated 0.19%.ConclusionFiscal policy measures affecting the prices of vehicles and fuel have a considerable potential for changing the long term composition of the vehicle fleet and its energy consumption, climate footprint and general environmental impact.

Quality and quantity of price elasticity of cigarette in Iran.

Effectiveness of tax policies to control cigarette consumption largely depends on the sensitivity of cigarette demand due to price change. Price elasticity is the measurement of this responsiveness. The main objective of this study is to measure quantity, and quality price elasticity of demand (PED) and cross-price elasticity of demand (XED) for Iranian and non-Iranian cigarette brands in Iran. This study used data from the 2017 Iranian household income and expenditures survey conducted in all 31 provinces of Iran. A total of 39,864 households were included in the survey. PED of quantity and quality and XED were estimated using restricted, unrestricted and quintile regression models. Our results s show that the Iranian and non-Iranians brands cigarettes were price inelastic and elastic, respectively. XED between Iranian and non-Iranian brands was positive suggesting households' preference for Iranian brands of cigarettes over non-Iranian brands. Quintile regression results suggest that PED varied between -1.20 and -0.91 across the distribution of quantity demanded. Imposing tax could be a useful policy tool to control smoking initiation and intensity in Iran. However, the effectiveness of such policy would depend on the better governance of taxation imposed on different brands of cigarettes.

Seasonal variability of price elasticity of demand of households using zonal tariffs and its impact on hourly load of the power system

Price elasticity of electricity demand values are crucial for a proper design or retrofit of time-of-use electricity tariffs. The aim of this paper was to propose an alternative methodology for determination of self and cross price elasticity of demand with daily resolution for electricity customers changing their settlement to the time-of-use tariff. Progressing implementation of smart metering systems provides access to more accurate data reflecting the consumers’ electricity consumption with at least hourly resolution, which has been a motivation to use load profiles data to analyze customer’s price elasticity. The method is based on load profiles’ comparison of customers using flat and time-of-use tariffs. A case-study example is presented for residential consumers settled according to time-of-use tariff in the area of one of Polish distribution system operators and the resulting price elasticity values vary significantly over the year. Effectiveness of zonal tariffs is also evaluated, along with their impact on the power system’s load in the summer and winter peak load periods. The results may be used by supply companies and distribution system operators to improve efficiency of applied demand response programs based on time-of-use tariffs and thus influence the safety of the power system operation.

CHARACTERISTICS OF MOBILE COMMUNICATION DEMAND: THE CASE OF TURKEY

In this study, different types of demand for mobile communications are discussed and price elasticity, income elasticity and cross-price elasticity of demand are analyzed for the case of Turkey. In the analysis, multiple linear regression approach is preferred and 68 quarterly time series between 2001 and 2017 are used. This study is the most comprehensive and up-to-date analysis of the Turkey Mobile Telecommunications Market and contributes to the empirical market analysis literature. The results obtained are as follows: The demand for access to network has (-1.4) price elasticity, (0.7) income elasticity and (-0.2) cross elasticity. The demand for network usage has (-0.2) price elasticity, (0.4) income elasticity and (0.4) cross elasticity. The demand for mobile diffusion has (-1.3) price elasticity, (0.6) income elasticity and (-0.2) cross elasticity.

Electricity used as additional medium for household supplementary space heating

This article analyses the potential of using electricity for supplementary heating purposes in households during low outside temperatures periods. Space heating using solid state fossil fuels, causes significant pollution of the local environment. In order to assess the potential of replacing fossil fuels with electricity for the supplementary heating purposes, the conditions determining financially reasonable exchanges of the main energy carrier consumption for heating purposes into electricity were analysed as a result of a change in price of this substitute. The concept of cross price elasticity of demand was used to reflect the current price conditions for energy carriers exchange and its values were determined for the energy contained in the most frequently used carriers for heating purposes, in relation to changes in electricity prices. The possible reduction in average electricity prices was considered, resulting from tariff change from a single zone to a two-zone tariff in the case of storage heater use, consuming electricity only in the off-peak zone. What is more, the potential of anti-smog tariff implemented in 2018 concerning the considered aspect was also analysed.

Patient responsiveness to a differential deductible: empirical results from The Netherlands

Health insurers may use financial incentives to encourage their enrollees to choose preferred providers for medical treatment. Empirical evidence whether differences in cost-sharing rates across providers affects patient choice behavior is, especially from Europe, limited. This paper examines the effect of a differential deductible to steer patient provider choice in a Dutch regional market for varicose veins treatment. Using individual patients’ choice data and information about their out-of-pocket payments covering the year of the experiment and 1 year before, we estimate a conditional logit model that explicitly controls for pre-existing patient preferences. Our results suggest that in this natural experiment designating preferred providers and waiving the deductible for enrollees using these providers significantly influenced patient choice. The average cross-price elasticity of demand is found to be 0.02, indicating that patient responsiveness to the cost-sharing differential itself was low. Unlike fixed cost-sharing differences, the deductible exemption was conditional on the patient’s other medical expenses occurring in the policy year. The differential deductible did, therefore, not result in a financial benefit for patients with annual costs exceeding their total deductible.

Collusion-enhancing effects of the own- and cross-price demand elasticities in merging multiproduct food industries: The case of chicken and red meat in the United States

The recent wave of megamergers sweeping the US food industry has raised significant concerns regarding “conglomerate” market power. Beef processors have been merging with pork and/or poultry processors (and vice versa). Concurrently, consumers have changed their attitude toward diet and health. The poultry industry has been more responsive to the changes in consumers’ lifestyles than the red meat industry by providing products which address health concerns. As a consequence, consumers exhibit stronger preference for chicken and are more willing to substitute chicken for red meat. The objective of this study is to examine the sustainability of collusion between multiproduct meat processing firms, under different values of the own-price demand flexibility of chicken as well as cross-price elasticities of demand between the markets of chicken and red meat. The findings indicate that the less (more) responsive demand for chicken gets to changes in its own price (price of red meat), the easier it gets for firms to sustain collusion.

Obesity-related health impacts of fuel excise taxation- an evidence review and cost-effectiveness study

BackgroundReducing automobile dependence and improving rates of active transport may reduce the impact of obesogenic environments, thereby decreasing population prevalence of obesity and other diseases where physical inactivity is a risk factor. Increasing the relative cost of driving by an increase in fuel taxation may therefore be a promising public health intervention for obesity prevention.MethodsA scoping review of the evidence for obesity or physical activity effect of changes in fuel price or taxation was undertaken. Potential health benefits of an increase in fuel excise taxation in Australia were quantified using Markov modelling to simulate obesity, injury and physical activity related health impacts of a fuel excise taxation intervention for the 2010 Australian population. Health adjusted life years (HALYs) gained and healthcare cost savings from diseases averted were estimated. Incremental cost-effectiveness ratios (ICERs) were reported and results were tested through sensitivity analysis.ResultsLimited evidence on the effect of policies such as fuel taxation on health-related behaviours currently exists. Only three studies were identified reporting associations between fuel price or taxation and obesity, whilst nine studies reported associations specifically with physical activity, walking or cycling. Estimates of the cross price elasticity of demand for public transport with respect to fuel price vary, with limited consensus within the literature on a probable range for the Australian context. Cost-effectiveness modelling of a AUD0.10 per litre increase in fuel excise taxation using a conservative estimate of cross price elasticity for public transport suggests that the intervention would be cost-effective from a limited societal perspective (237 HALYs gained, AUD2.6 M in healthcare cost savings), measured against a comparator of no additional increase in fuel excise. Under “best case” assumptions, the intervention would be more cost-effective (3181 HALYs gained, AUD34.2 M in healthcare cost savings).ConclusionsExploratory analysis suggests that an intervention to increase fuel excise taxation may deliver obesity and physical activity related benefits. Whilst such an intervention has significant potential for cost-effectiveness, potential equity and acceptability impacts would need to be minimised. A better understanding of the effectiveness and cost-effectiveness of a range of transport interventions is required in order to achieve more physically active transport environments.

Quasilinear Utility and Two Market Monopoly

The use of quasilinear utility functions in economic analyses is widespread. This paper presents an overdue clarification on the implications of quasilinear utility for two market monopoly. The paper begins by deriving the demands facing a two market monopoly from a representative consumer with quasilinear utility. Expressions are derived for the profit margins expressed solely in terms of the own and cross-price elasticities of demand. The paper also analyzes the implications of quasilinear utility for other issues in two market monopoly: pricing below marginal cost in a market, third-degree price discrimination when the monopoly products are substitutes and pricing in the inelastic region of demands.

PERMINTAAN TERIGU DI INDONESIA

This study on wheat demand in Indonesia attempto know the factors influencing the wheat demand and to what extent it is influenced.The data used in this study is a time series of 1967 to 1986, and regression analysis was employed with static double log model.The result indicates that the price elasticity of demand for wheat is not elastic, while the income elasticity of demand is elastic. The cross price elasticity of demand of rice is not elastic.Variables that consistently influence demand of wheat are, wheat price, rice price, and income. While for sugar, egg, milk, there is no strong eyidencce indicating that they are the wheat complements. It can not be concluded either that corn is the substitut of wheat

A nutritional goods and a complete consumer demand system estimation for South Africa using actual price data

Empirical analysis of South African indirect tax policy reform and the welfare consequences of such reform has been limited by a lack of reliable consumer demand system estimations. One reason for potentially unreliable demand estimations is not using actual price data in estimation. In this paper, the results of a nutritional goods demand system estimation and a complete demand system estimation are reported. Both systems were estimated with the use of the quadratic almost ideal demand system (QUAIDS) model incorporating demographic variables and using actual price and expenditure data. Subsequent to estimations, expenditure, own and cross-price elasticities of demand were calculated for both demand systems. The coefficients estimated provided largely statistical significant results and all elasticities calculated seem plausible in sign and magnitude.

A nutritional goods and a complete consumer demand system estimation for South Africa using actual price data

Empirical analysis of South African indirect tax policy reform and the welfare consequences of such reform has been limited by a lack of reliable consumer demand system estimations. One reason for potentially unreliable demand estimations is not using actual price data in estimation. In this paper, the results of a nutritional goods demand system estimation and a complete demand system estimation are reported. Both systems were estimated with the use of the quadratic almost ideal demand system (QUAIDS) model incorporating demographic variables and using actual price and expenditure data. Subsequent to estimations, expenditure, own and cross-price elasticities of demand were calculated for both demand systems. The coefficients estimated provided largely statistical significant results and all elasticities calculated seem plausible in sign and magnitude.

Estimation of own and cross price elasticities of demand for wood-based products and associated substitutes in the German construction sector

The use of wood and wood-based products has positive effects on environmental considerations, e.g., climate change mitigation or the reduction of waste and other emissions. With regard to climate change mitigation, the benefit of wood-based products is based on storage effects and substitution effects. Especially in the German construction sector, large quantities of wood are used. Moreover, in this sector, products often remain in use over several decades. For these reasons the main objective of this paper is to provide information on factors influencing the choice of construction materials in the German construction sector for policy makers and market participants. The chosen method for estimating the interactions between prices of wood-based products, the prices of the associated substitutes, and the use of wood in the construction sector is the calculation of elasticities of demand. The analysis focuses on two product groups: (1) buildings as a whole and (2) different construction materials, such as bricks or sawnwood. In the field of residential and non-residential construction, the current state of knowledge for Germany is for the first time supported and partly quantified by mathematical methods. Non-significant results in the field of residential construction give an indication that the choice of building materials is based on non-quantifiable and statistically non-available factors. Elasticities for non-residential buildings in Germany are estimated for the first time. The estimated values are plausible in size and sign. It is evident that the tested products are substitutes. Hence, relevant information can be derived for market participants and related policies.

Testing the demand approach to reconstruct pre-industrial agricultural output

ABSTRACTA common method to reconstruct historical national accounts is the demand approach, which calculates agricultural consumption from the development of wages and prices of agricultural and non-agricultural products assuming constant income, own price and cross price elasticities of demand. This study uses agricultural data for Sweden 1802–1950, which is more reliable than for other countries, to put the approach to test. Time series analysis shows that the demand approach could be modelled as a cointegrating relationship between per capita demand and the deflated wage. Income elasticity is estimated to +0.4. Using the estimated parameters to extrapolate Swedish agricultural consumption back to the Middle Ages accords quite well with other indicators. However, out-of-sampling shows that the 90% confidence interval is as large as ±0.15–0.25 natural logarithms.

Correction: Relationship between the Uncompensated Price Elasticity and the Income Elasticity of Demand under Conditions of Additive Preferences

Income and price elasticity of demand quantify the responsiveness of markets to changes in income and in prices, respectively. Under the assumptions of utility maximization and preference independence (additive preferences), mathematical relationships between income elasticity values and the uncompensated own and cross price elasticity of demand are here derived using the differential approach to demand analysis. Key parameters are: the elasticity of the marginal utility of income, and the average budget share. The proposed method can be used to forecast the direct and indirect impact of price changes and of financial instruments of policy using available estimates of the income elasticity of demand.