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The Application and Economic Interpretation of Selectivity Models
Author(s) -
Huang Chung L.,
Raunikar Robert,
Misra Sukant
Publication year - 1991
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 - 10.2307/1242734
Subject(s) - economics , econometrics , consumption (sociology) , private consumption , orange juice , marginal utility , microeconomics , monetary economics , chemistry , food science , social science , sociology , fiscal policy
Substantial differences in economic interpretations may be inferred from the estimated selectivity model results. Using the demand for frozen concentrated orange juice (FCOJ) as an example, the study suggests that the consumption patterns are quite similar between national brand and private label when the marginal effects and elasticities are evaluated based on actual observations rather than unobserved latent variables. Results show that private label FCOJ is considered as a normal (inferior) good if the income effect is assessed based on actual (potential) purchases. The estimated cents‐off elasticities for private label FCOJ also vary substantially depending on which approach is used.