English, Article, Journal or magazine article edition: When are Supply and Demand Determined Recursively Rather than Simultaneously? Another look at the Fulton Fish Market Data Kathryn Graddy; Peter E. Kennedy

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Bookmark: http://trove.nla.gov.au/version/20375
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • When are Supply and Demand Determined Recursively Rather than Simultaneously? Another look at the Fulton Fish Market Data
Author
  • Kathryn Graddy
  • Peter E. Kennedy
Physical Description
  • preprint
Notes
  • When a supply and demand model is recursive, with errors uncorrelated across the two equations, ordinary least square (OLS) is the recommended estimation procedure. Supply to a daily fish market is determined by the previous night`s catch, so this would appear to be a good example of a recursive market. Despite this, data from the Fulton fish market are treated in the literature, without explanation, as coming from a simultaneous-equations market. We provide the missing explanation: inventory changes, influenced by current price, affect daily supply. Instrumental variable estimates using the full data set differ very little from OLS estimates using only observations with little inventory change, providing strong support for our explanation. Finally, we note that because of inventory changes, estimates of supply price elasticities in high-frequency markets must be interpreted with care.
  • Simultaneous Equations, Inventories, Demand, Estimation, Fish, Fulton Market
  • RePEc:oxf:wpaper:297
Language
  • English
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