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Deriving a Flexible Mixed Demand System: The Normalized Quadratic Model
Author(s) -
Moschini GianCarlo,
Rizzi Pier Luigi
Publication year - 2007
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2007.01027.x
Subject(s) - quadratic equation , function (biology) , demand curve , quadratic model , set (abstract data type) , on demand , quadratic function , computer science , mathematical optimization , economics , mathematical economics , econometrics , mathematics , microeconomics , commerce , geometry , response surface methodology , evolutionary biology , machine learning , programming language , biology
This article deals with the specification of a locally flexible and theory‐consistent system of mixed demand functions, a framework that allows for a rich set of possibilities about what is assumed as exogenous in a demand model. A coherent mixed demand system is derived by using the restricted expenditure function typically studied in the related area of rationed demands. The method is implemented by a new normalized quadratic (NQ) parameterization of the restricted expenditure function. The resulting NQ mixed demand system is illustrated with an application to a nine‐good model of the Italian demand for vegetables.