An Econometric Analysis of Price Dynamics in the Presence of a Price Floor: The Case of American Cheese

In this paper, we present an econometric analysis for the effects of a price floor on price dynamics and price volatility. A price floor (implemented as a part of government pricing policy) provides a censoring mechanism for price determination. We specify and estimate a dynamic Tobit model under time-varying volatility. The model is applied to analyze the effects of a price support program on price dynamics and price volatility in the U.S. American cheese market. The econometric analysis provides useful insights on price dynamics in the presence of a government-determined price floor.

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Journal Article
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Journal of Agricultural and Applied Economics, 37, 1
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JEL Codes:
Q0; D4; C5

 Record created 2017-04-01, last modified 2020-10-28

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