When are supply and demand determined recursively rather than simultaneously? Another look at the Fulton Fish Market data
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 recursiv...
| Main Authors: | , |
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| Format: | Working paper |
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University of Oxford
2006
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| _version_ | 1797069702937182208 |
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| author | Graddy, K Kennedy, P |
| author_facet | Graddy, K Kennedy, P |
| author_sort | Graddy, K |
| collection | OXFORD |
| description | 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. |
| first_indexed | 2024-03-06T22:28:23Z |
| format | Working paper |
| id | oxford-uuid:577062f9-50a2-46cb-8d6a-f210b9ac0741 |
| institution | University of Oxford |
| last_indexed | 2024-03-06T22:28:23Z |
| publishDate | 2006 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:577062f9-50a2-46cb-8d6a-f210b9ac07412022-03-26T16:56:46ZWhen are supply and demand determined recursively rather than simultaneously? Another look at the Fulton Fish Market dataWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:577062f9-50a2-46cb-8d6a-f210b9ac0741Symplectic ElementsBulk import via SwordUniversity of Oxford2006Graddy, KKennedy, PWhen 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. |
| spellingShingle | Graddy, K Kennedy, P When are supply and demand determined recursively rather than simultaneously? Another look at the Fulton Fish Market data |
| title | When are supply and demand determined recursively rather than simultaneously? Another look at the Fulton Fish Market data |
| title_full | When are supply and demand determined recursively rather than simultaneously? Another look at the Fulton Fish Market data |
| title_fullStr | When are supply and demand determined recursively rather than simultaneously? Another look at the Fulton Fish Market data |
| title_full_unstemmed | When are supply and demand determined recursively rather than simultaneously? Another look at the Fulton Fish Market data |
| title_short | When are supply and demand determined recursively rather than simultaneously? Another look at the Fulton Fish Market data |
| title_sort | when are supply and demand determined recursively rather than simultaneously another look at the fulton fish market data |
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