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An Econometric Analysis of Price Dynamics in the Presence of aPrice 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 pricefloor on price dynamics and price volatility. A price floor (implemented asa part of government pricing policy) provides a censoring mechanism forprice determination. We specify and estimate a dynamic Tobit model undertime-varying volatility. The model is applied to analyze the effects of aprice support program on price dynamics and price volatility in the U.S.American cheese market. The econometric analysis provides useful insights onprice dynamics in the presence of a government-determined price floor.

Keywords

censored regressionmarket liberalizationmodel selectionprice dynamicsprice volatilityQ0D4C5

Information

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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