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Product Aggregation Bias as a Specification Error in Demand Systems
Author(s) -
Davis George C.
Publication year - 1997
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 - 10.2307/1243946
Subject(s) - product (mathematics) , computer science , econometrics , aggregation problem , simple (philosophy) , on demand , economics , microeconomics , mathematics , philosophy , geometry , epistemology , multimedia
Inherent in all demand studies is some form of product aggregation which can lead to product aggregation bias. This article develops a simple procedure for incorporating product aggregation bias in demand systems that permits testing of product aggregation bias with a standard likelihood ratio test. An empirical illustration of the procedure demonstrates the importance of proper product aggregation.