Demand Systems for Competing Commodities: An Application of the Uniform Substitute Hypothesis

The uniform substitute hypothesis is used to develop a conditional demand system for juice products. The hypothesis offers a means to improve upon the precision of the parameter estimates and save degrees of freedom, when closely related competing goods are included in a demand system. Uniform substitute restrictions are tested for alternative juke groupings using the likelihood ratio test. The results indicate that juices in a group must be quite similar to accept the restrictions.