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Demand Elasticities from a Discrete Choice Model: The Natural Christmas Tree Market
Author(s) -
Davis George C.,
Wohlgenant Michael K.
Publication year - 1993
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 - 10.2307/1243580
Subject(s) - multinomial logistic regression , elasticity (physics) , price elasticity of demand , econometrics , economics , nested logit , tree (set theory) , discrete choice , christmas tree , microeconomics , statistics , mathematics , forestry , geography , mathematical analysis , materials science , composite material
A procedure is demonstrated for estimating market‐level demand elasticities from household data suffering from sample selectivity problems. The procedure uses McFadden's nested multinomial logit model and is applied to the natural Christmas tree market. Results indicate that the own‐price elasticity of natural Christmas trees is −0.674 and the cross price elasticity of natural Christmas trees with respect to artificial Christmas trees is 0.188. These are the first known demand elasticity estimates for the natural Christmas tree market.