M4301
Consumer Behavior and Demand Analysis: Theory and Applications

Instructor

Prof. Xiaohua YU Ph.D., University of Goettingen
Email: xyu@gwdg.de; Tel: 0551-3919574

Course Description

This course is designed for graduate-level students at the University of Goettingen and the Doctoral Certificate Program in Agricultural Economics, and helps understand the fundamental economic theory of consumer behaviors and practice demand analysis. This course includes two parts: Part I introduces the basic theory and Part II applies the theory to demand analysis using data from developing countries.

After a brief review of the basic theory, this course will focus on

• Econometric models for demand analysis
• Extension of basic theories
• Estimation of Demand for Nutrition

The detailed course may be adjusted by the demand of the students.

Course Outline

1. Introduction
2. Review of the Demand Theory
   1. Utility and Demand
   2. Cost minimization
   3. Properties of Demands
   4. Consumer surplus
3. The Theory at Work
   1. Stone’s analysis
   2. Rotterdam Demand Model
   3. Linear Expenditure System (LES)
   4. Almost Ideal Demand System (AIDS)
   5. Quadratic Almost Ideal Demand System (QUAIDS)
4. Separability and Two-stage Budgeting
   1. Weak Separability
   2. Implicit Separability
   3. Strong Separability
   4. Indirect Separability
5. Aggregation
   1. Homotheticity and quasi-homotheticity
   2. Linear and non-linear-aggregation
6. Demand for Food Quality and Nutrition
   1. Quality Demand
   2. Quality and Quantity
   3. Nutrient Elasticities in a Complete Food Demand System
   4. Modeling Physical Quantities of Food and Nutrients
7. Econometric Techniques
   1. Model Habit Persistence
   2. Zero Observations in Demand Analysis
   3. Demographic Variables and Engel’s Method
8. Lab session: Introduction to Stata

Teaching Method: Lectures + Lab Sessions

Credits: 3

Readings and References

• Balestra P. and M. Nerlove (1966) “Pooling Cross Section and Time Series Data in the Estimation of a Dynamic Model: The Demand for Natural Gas.” Econometrica, Vol. 34(3):585-612.
• Chen D., D. Abler, D. Zhou, X. Yu, and W. Thompson, A Meta-Analysis of Food Demand Elasticities for China, Accepted in Applied Economics Perspective and Policy.
• Deaton A. and J. Muellbauer. (1980). Economics and Consumer Behavior. Cambridge: Cambridge University Press.
• Deaton, A. (1988). “Quality, Quantity and Spatial Variation of Price.” American Economic Review 78(3):418-430.
• Deaton A. (1986) “Demand Analysis” Handbook of Econometrics, Chapter 30, Vol.III. 1767-1839.
• Deaton, A (1997) The Analysis of Household Surveys : A microeconometric Approach to Development Policy. World Bank and Johns Hopkins University Press.
• Fan, S., E. J. Wailes, and G. L. Cramer. (1995). “Household Demand in Rural China: A Two-Stage LES-AIDS Model.” American Journal of Agricultural Economics 77(1):54-62.
• Ferreira F. H. G., A. Fruttero, P. G. Leite and L. R. Lucchetti (2013) “Rising Food Prices and Household Welfare: Evidence from Bbrazil in 2008.” Journal of Agricultural Economics, Vol. 64(1):151-176.
• Gao Z., X. Yu and J. Lee (2013): “Consumer Demand for Healthy Diet: New Evidence from the Healthy Eating Index”, Forthcoming in Australian Journal of Agricultural and Resource Economics
• Green R. and J. M. Alston (1990) “Elasticities in AIDS Models.” American Journal of Agricultural Economics, Vol. 72(2):442-445.
• Hasiner E. and X. Yu (2016) Meat Consumption and Democratic Governance: A Cross-National Analysis , Forthcoming in China Economic Review. DOI: 10.1016/j.chieco.2016.06.008
• Hausman, Jerry A, (1978). "Specification Tests in Econometrics," Econometrica, vol. 46(6):1251-71.
• Hausman Jerry A. (1981) “Exact Consumer's Surplus and Deadweight Loss.” American Economic Review, Vol. 71(4):662-676.
• Heien Dale and Cathy Roheim Wessells (1990) “Demand Systems Estimation with Microdata: A Censored Regression Approach.”Journal of Business & Economic Statistics, Vol. 8, No. 3. (Jul., 1990), pp. 365-371.
• Hendler R. (1975) “ Lancaster's New Approach to Consumer Demand and Its Limitations.” The American Economic Review, Vol. 65(1): 194-199.
• Huang K. S. (1996) “Nutrient Elasticities in a Complete Food Demand System”, American Journal of Agricultural Economics 78(1):21-29.
• Irz X. (2010) Modeling physical quantities of food and nutrients consumed from aggregate data—with an application to Finland, Agricultural Economics 41 (2010) 293–304
• Lancaster K. J. (1966) “A New Approach to Consumer Theory.” The Journal of Political Economy, Vol. 74(2): 132-157.
• McKelvey Christopher (2011) “Price, unit value, and quality demanded”, Journal of Development Economics, vol. 95 (2011) 157–169.
• Meyer S. and X. Yu. “Comparison of Several Demand Systems by Monte Carlo Simulations.” Selected Presentation in AAEA 2011 annual conference.
• Min S., X. Wang, X. Yu (2021) Does dietary knowledge affect household food waste in the developing economy of China?, Food Policy. Volume 98, 101896
• Moschini, G. (2001). “A Flexible Multistage Demand System Based on Indirect Separability.” Southern Economic Journal 68(1):22-41.
• Takayama A. (1982) “On Conusmer’s Surplus”. Economics Letters, vol.(10) 35-42.
• Tian X. and X. Yu (2013): “The Demand for Nutrients in China”, Forthcoming in Frontiers of Economics in China.
• Wooldridge J. M (2002). Econometric Analysis of Cross Section and Panel Data. MIT Press , 2002.
• Yu, X., and D. Abler (2009). “The Demand for Food Quality in Rural China.” American Journal of Agricultural Economics, Vol.91(1):57-69.
• Yu X. and D. Abler: (2010) “Interactions between Cigarette and Alcohol Consumption in Rural China”, European Journal of Health Economics. Vol. (11):151–160.
• Yu X. and David Abler (2010): “Incorporating Zero and Missing Responses into CVM with Open-Ended Bidding: Willingness to Pay for Blue Skies in Beijing.” Environment and Development Economics, Vol.15:535-556.
• Yu X., B. Yan and Z. Gao (2014). Can Willingness-To-Pay Values be Manipulated? Evidences from an Experiment on Organic Food in China, Agricultural Economics. 45(S1):119-127.
• Yu X. and D. Abler (2014). “Where Have All the Pigs Gone? Inconsistencies in Pork Statistics in China”. China Economic Review, Vol.30: 469-484.
• Yu X. (2018) Engel Curve, Farmer Welfare and Food Consumption in 40 Years of Rural China, China Agricultural Economic Review. Vol.10(1):65-77
• Zhou D. , and X. Yu (2015) “Calorie Elasticities with Income Dynamics: Evidence from the Literature”, Accepted in Applied Economic Perspective and  Policy.
• Zhou D. , X. Yu and T. Herzfeld (2015).”Dynamic Food Demand in Urban China”.  China Agricultural Economic Review.Vol.7(1):27-44.
• Zhou D., X. Yu, Chen D. and D. Abler (2020) Projecting Meat and Cereals Demand for China Based on a Meta-Analysis of Income Elasticities. China Economic Review.