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Abstract

We investigate pricing and demand issues for four fresh potato categories (russet, red, white, and minor colored), organic fresh potatoes, and two processed potato categories (frozen/refrigerated and dehydrated) using a nonlinear generalized almost ideal demand system (GAIDS) that is closed under unit scaling (CUUS). We identify five major findings. First, we found little evidence for potato demand differences among the four U.S. regions in our study (east, west, north, and south). Second, increased consumer preferences for organic food consumption have caused price declines for red, russet and minor colored potatoes while organic potato prices rose significantly. Third, white potatoes emerged from the study as apparently the non-organic category most able to compete in an increasingly organicallyoriented market. Fourth, potatoes as an aggregate commodity are inferior good, with perhaps the exception being the minor colored potatoes. Fifth, the potato market competes with other carbohydrate groups. In particular, we find strong statistical support that lower bread or frozen vegetables prices implying reduced system expenditures on potatoes and for dehydrated potato demand being sensitive to competing carbohydrate prices.

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