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Abstract

We present in this study an agricultural household model that describes the joint production-consumption decision making of Chinese rural households under imperfect market. We conclude that the marginal value of a food product consumed is the sale price if there is a net sale for this food item; it is the purchase price if there is a net purchase; and it is the shadow price if there is no purchase or sale. A preliminary empirical food estimation analysis confirms that it provides superior demand estimates to use these "effective prices" rather than traditionally used purchase prices or weighted average of sale and purchase prices in rural food demand analysis in less developed countries (LDCs).

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