Lusk and Tonsor, 2016
Lusk, J. L., & Tonsor, G. T. (2016). How meat demand elasticities vary with price, income, and product category. Applied Economic Perspectives and Policy, 38(4), 673-711.
- As US beef and pork prices approached record high levels in 2014, industry analysts expressed surprised at consumer response.
- Because the relative price swings have occurred only recently, traditional approaches to demand analysis that rely on historical data series may be less useful than is typically the case.
- Employing one of the largest and longest-running choice experiments, we analyze data on 110,295 choices made by 12,255 consumers observed over a year-long time period coinciding with historically high meat prices.
- Our findings reveal nonlinear demands for meat products, with demand being more inelastic at higher prices.
- Ground beef, steak, and pork chop demands are more sensitive to changes in chicken breast price than the reverse.
- Moreover, cross-price elasticities between disaggregate meat products shrink as prices rise. Consumers' incomes significantly affect demand inter-relationships.
- Higher income consumers are more likely to choose steak and chicken breasts and are less likely to choose ground beef, chicken wings, and deli ham than are lower income consumers. High-income consumers tend to be less responsive to own-price changes and more responsive to cross-price changes than lower income consumers.
Notes
- Demand elasticity reduces at higher prices means that as meat prices rise, people become less responsive to further changes in price.