Micro-Demand Systems Analysis of Non-Alcoholic Beverages in the United States: An Application of Econometric Techniques Dealing With Censoring

Abstract

A censored Almost Ideal Demand System (AIDS) and a Quadratic Almost Ideal Demand System (QUAIDS) were estimated in modeling non-alcoholic beverages. Five estimation techniques were used, including the conventional Iterated Seemingly Unrelated Regression (ITSUR), two-stage methods such as the Heien and Wessells (1990) and the Shonkwiler and Yen (1999) approaches, the generalized maximum entropy method and the Amemiya-Tobin framework of Dong, Gould and Kaiser (2004). Our results based on various specifications and estimation techniques are quantitatively similar and indicate that price elasticity estimates have a greater variability in more highly censored non-alcoholic beverage items such as tea, coffee and bottled water as opposed to less censored non-alcoholic beverage items such as carbonated softdrinks, milk and fruit juices.Censored demand systems, AIDS, QUAIDS, Two-Step Methods, Generalized Maximum Entropy, Amemiya-Tobin Framework, Non-Alcoholic Beverages, Agribusiness, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, C34, D12,