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An Econometric Analysis of Price Dynamics in the Presence of a Price Floor: The Case of American Cheese

Published online by Cambridge University Press:  28 April 2005

Jean-Paul Chavas  and
Kwansoo Kim
Jean-Paul Chavas
Affiliation:
Department of Agricultural and Applied Economics, University of Wisconsin, Madison, WI
Kwansoo Kim
Affiliation:
Department of Agricultural and Life Sciences, Seoul National University, Seoul, Korea
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Abstract

In this paper, we present an econometric analysis of the effects of a price floor on price dynamics and price volatility. A price floor (implemented as a part of government pricing policy) provides a censoring mechanism for price determination. We specify and estimate a dynamic Tobit model under time-varying volatility. The model is applied to analyze the effects of a price support program on price dynamics and price volatility in the U.S. American cheese market. The econometric analysis provides useful insights on price dynamics in the presence of a government-determined price floor.

Keywords

censored regressionmarket liberalizationmodel selectionprice dynamicsprice volatilityQ0D4C5
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 37 , Issue 1 , April 2005 , pp. 21 - 35
Copyright
Copyright © Southern Agricultural Economics Association 2005

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