Volume 19, Issue 1, July 1994

July, 1994

PRICE-CONDITIONAL TECHNOLOGY

By: Fulginiti, Lilyan E.
Economics theorists for years have considered the possibility that the direction of technical change is altered by changes in relative prices. Prices also have been identified as one of the determinants of technical change through innovation. This article extends the theory of the firm to cover situations in which the firms' technology set is conditional on expected prices. The basic idea is to distinguish between "market prices," or the prices that guide the firm's choices subject to the technology that is in place, and "normal prices," the prices conditioning the choice of technology. A "generalized" price effect is obtained that included the traditional price effect as well as the technical change effect of price changes, and an example is presented.
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July, 1994

A COMPARISON OF DEMANDS FOR MEAT PRODUCTS IN THE PACIFIC RIM REGION

By: Capps, Oral, Jr.; Tsai, Reyfong; Kirby, Raymond; Williams, Gary W.
The Rotterdam model is used to obtain estimates of demand parameters for meat products in Taiwan, South Korea, and Japan. Unlike most previous studies of demand systems, the model takes into account simultaneous-equation bias which arises due to the endogeneity of total expenditure. Beef, pork, and chicken are separable from marine products for each Pacific Rim country. However, demand elasticities for beef, pork, and chicken are different among the various Pacific Rim nations. One may not then use the elasticity estimates of a particular country and apply them to other Pacific Rim markets.
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July, 1994

DIFFERENCES IN CONTINGENT VALUATION ESTIMATES FROM REFERENDUM AND CHECKLIST QUESTIONS

By: Jordan, Jeffrey L.; Elnagheeb, Abdelmoneim H.
This article compares willingness-to-pay (WTP) estimates from an actual survey using a checklist question regarding WTP for groundwater quality improvements to WTP estimates that would have been obtained had a single-bounded referendum (SBR) or a double-bounded referendum (DBR) question been asked. Results indicate differences among estimates from the three types of question formats. There was a loss of statistical efficiency of parameter and WTP estimates when moving from the checklist and DBR formats to the SBR format. WTP estimates from the SBR question were more sensitive to sample size and model specification than the others.
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July, 1994

THE EFFECT OF QUALITY ASSURANCE POLICIES FOR PROCESSING TOMATOES ON THE DEMAND FOR PESTICIDES

By: Starbird, S. Andrew
In California, acceptance sampling is used to monitor the quality of processing tomatoes delivered by growers to processors. A proposal to change the current quality assurance policy was recently put forth to reduce the growers' incentive to use pesticides. In this article we examine the effect of alternative quality assurance policies on profit-maximizing growers' demand for pesticides. The results indicate that the demand for pesticides is sensitive to changes in the quality assurance policy and that the proposed policy would reduce the optimal level of pesticide use on processing tomatoes. Disregarding the impacts of quality assurance policy may be the reason that the demand for pesticides has been underestimated so often in the past.
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July, 1994

WHEN FLEXIBLE FORMS ARE ASKED TO FLEX TOO MUCH

By: Driscoll, Paul J.
Taylor series-based flexible forms cannot be interpreted as Taylor series approximations unless all data used in estimation lie in a region of convergence. When flexible forms lose their Taylor series interpretation, elasticity estimates will be biased. When the flexible form is a translog, Rotterdam, or AIDS model, the region of convergence is shown to be the entire positive orthant. Regions of convergence associated with quadratic, Leontief, and any flexible form that does not employ logged arguments are smaller and may not encompass the entire data set. Implications for production and demand analyses and experimental design are discussed.
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July, 1994

THE INVERSE LEWBEL DEMAND SYSTEM

By: Eales, James S.
A new model of consumer preferences is introduced. It is appropriate for modeling perishable commodities which are produced with a lag, where it is reasonable to assume the market-level quantities are fixed by previously made production decisions. The inverse Lewbel system, as it is called, is a flexible nonlinear system of share equations, which nests two other inverse demand systems, the direct translog and the inverse AIDS. Thus, the inverse Lewbel may be employed to test whether these more restrictive preference structures are appropriate. In an application to quarterly U.S. meat consumption, the more restrictive structures are rejected.
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July, 1994

KANSAS WHEAT YIELD RISK MEASURES AND AGGREGATION: A META- ANALYSIS APPROACH

By: Marra, Michele C.; Schurle, Bryan W.
A meta-analysis approach to prediction of farm level yield risk from county level yield series is applied to Kansas wheat yields. A nonlinear relationship between county level and farm level yield risk is found, which indicates that yield risk increases at an increasing rate as the number of acres in the risk measure decreases. County level yield variability should be adjusted upward by approximately .1% for each percent difference in county acreage and average farm acreage within the county. The meta-analysis approach is shown to be promising for the prediction of farm level yield risk when farm level information is difficult to obtain.
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July, 1994

ESTIMATING CORN YIELD RESPONSE MODELS TO PREDICT IMPACTS OF CLIMATE CHANGE

By: Dixon, Bruce L.; Hollinger, Steven E.; Garcia, Philip; Tirupattur, Viswanath
Projections of the impacts of climate change on agriculture require flexible and accurate yield response models. Typically, estimated yield response models have used fixed calendar intervals to measure weather variables and omitted observations on solar radiation, an essential determinant of crop yield. A corn yield response model for Illinois crop reporting districts is estimated using field data. Weather variables are time to crop growth stages to allow use of the model if climate change shifts dates of the crop growing season. Solar radiation is included. Results show this model is superior to conventionally specified models in explaining yield variation in Illinois corn.
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July, 1994

THE USE OF MEAN-VARIANCE FOR COMMODITY FUTURES AND OPTIONS HEDGING DECISIONS

By: Garcia, Philip; Adam, Brian D.; Hauser, Robert J.
This study provides additional evidence of the usefulness of mean-variance procedures in the presence of options which can truncate and skew the returns distribution. Using a simulation analysis, price hedging decisions are examined for hog producers when options are available. Mean-variance results are contrasted with optimal decisions based on negative exponential and Cox-Rubinstein utility functions over 56 ending price scenarios and two levels of risk aversion. The findings from our simulation, which considers discrete contracts, basis risk, lognormality in prices, transactions costs, and alternative utility specifications, affirm the usefulness of mean-variance framework.
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July, 1994

CONDITIONAL DEMAND AND ENDOGENEITY? A CASE STUDY OF DEMAND FOR JUICE PRODUCTS

By: Brown, Mark G.; Behr, Robert M.; Lee, Jonq-Ying
The question of endogeneity of conditional expenditures, as well as prices, in conditional demand equations for justices is examined. Both conditional expenditures and prices were found to be uncorrelated with the conditional demand errors, based on Wu-Hausman tests. Conditional demand error variance/covariance estimates and corresponding Slutsky coefficient estimates were approximately proportional, as predicted by the theory of rational random behavior, further supporting independence of conditional expenditures and conditional errors for juice demands.
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July, 1994

SIMULTANEITY OF TECHNOLOGY ADOPTION AND PRODUCTIVITY

By: Zepeda, Lydia
A simultaneous equation generalized probit model is estimated to determine factors affecting technology adoption by California dairy farmers. Since productivity and technology choice are jointly determined, a single-equation approach to determine whether productivity affects technology adoption is subject to simultaneity bias. Since the system of equations contains both continuous and discrete endogenous variables, generalized probit is used. The findings indicate that the biased single-equation estimates tend to exaggerate relationships with explanatory variables, and in some cases, lead to different implications. This emphasizes the need to use the consistent and asymptotically more efficient generalized probit results to account for simultaneity.
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July, 1994

INTERREGIONAL EFFECTS OF REDUCED TIMBER HARVESTS: THE IMPACT OF THE NORTHERN SPOTTED OWL LISTING IN RURAL AND URBAN OREGON

By: Waters, Edward C.; Holland, David W.; Weber, Bruce A.
A core-periphery, multiregional, input-output model of western Oregon is used to estimate impacts of periphery timber harvest reductions resulting from listing of an endangered species. Under the most probable scenario, 31,620 total jobs would be lost in the two regions. Fourteen percent of this impact is absorbed in the core (Metro) region. Forty percent of periphery and 80% of Metro jobs lost are from service sectors, a result of important core-periphery trade in central place services. Explicit inclusion of unemployment benefits for displaced workers reduces employment loss estimates by 12% to 14%.
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July, 1994

DEMAND FOR WHEAT CLASSES BY PACIFIC RIM COUNTRIES

By: Wilson, William W.
The transcendental logarithmic function is used to derive demand functions which are estimated for wheat classes imported by Pacific Rim countries. Results indicate substantial differences exist in underlying demand parameters for wheat of different classes as well as across countries. In addition, the expenditure level has important impacts on the distribution of imported wheat classes, and preferences have shifted significantly through time, generally toward higher protein wheats.
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July, 1994

ESTIMATING REVENUE-CAPTURE POTENTIAL ASSOCIATED WITH PUBLIC AREA RECREATION

By: Teasley, R. Jeff; Bergstrom, John C.; Cordell, H. Ken
A traditional contingent valuation approach and the "trip response method" were examined as potential techniques for measuring public area recreation revenue-capture potential. Empirical results suggest that both methods are useful for assessing revenue-capture potential. Additional research on alternative methods for assessing recreation revenue-capture potential is encouraged.
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July, 1994

HABIT FORMATION AND VARIETY SEEKING IN A DISCRETE CHOICE MODEL OF RECREATION DEMAND

By: Adamowicz, Wiktor L.
The recreational site choice decision modeled in most economic analyses seldom contains previous experience with the site as a characteristic or attribute. A rational dynamic model is used to incorporate previous experience with the site in a model of the choice of recreation sites. Based on the comparison of dynamic and static models, it is apparent that dynamic elements influence choice. The use of previous consumption as an attribute (either in a naïve or rational form) is an improvement over static models of choice. In welfare analysis, this effect may be a significant factor. For example, a change in prices or quality attributes may have a much larger impact on those individuals who have developed habits.
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July, 1994

MODELING NONNEGATIVITY VIA TRUNCATED LOGISTIC AND NORMAL DISTRIBUTIONS: AN APPLICATION TO RANCH LAND PRICE ANALYSIS

By: Xu, Feng; Mittelhammer, Ronald C.; Torell, L. Allen
This study presents an empirical method of modeling the nonnegativity of dependent variables using truncated logistic and normal disturbance distributions. The method is applied in estimating a ranch land hedonic price function. Results show that the degree of truncation is significant.
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July, 1994

ECONOMETRIC PRODUCTION MODELS WITH ENDOGENOUS INPUT TIMING: AN APPLICATION TO ECUADORIAN POTATO PRODUCTION

By: Antle, John M.; Capalbo, Susan Marie; Crissman, Charles C.
In this article, a model was developed in which the quantity and timing of input and harvest decisions are endogenous. The endogenous timing model allows all of the information about input and harvest behavior to be utilized, and it provides a basis for linking econometric production analysis to the time-specific analyses in other scientific disciplines used to assess the environmental or human health impacts of agricultural production practices. The case study of fungicide use on Ecuadorian potatoes was conducted with a unique data set containing detailed information on both quantity and timing of input use. The results showed that both quantity and timing of chemical use were responsive to economic variables.
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