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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
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.
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- Copyright © Southern Agricultural Economics Association 2005
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