CHAPTER VI
EMPIRICAL RESULTSPRICE AND MARGIN MODELS
Price dependent monthly and quarterly demand equations were esti
mated using ordinary least squares and three stage least squares
methods. The variables found in each expression were dictated by the
theoretical model presented in Chapter II and the impluse response
functions derived from the causality analysis presented in Chapter V.
However, certain lagged price variables were either included or elimi
nated based on a set of diagnostic checks and pretesting procedures,
both of which are discussed in Appendix B. The criteria determining
whether single equation or systems estimation methods were used are also
presented in Appendix B.
As with the causality tests, monthly and quarterly data were used
for both the 31-40 and 21-25 size classes. The monthly and quarterly
models utilized data for the years 1972 through 1981. Estimates of the
monthly models by size class are presented first, followed by quarterly
model estimates.
Monthly Data
The structural models of monthly retail, wholesale, and exvessel
demand were estimated using ordinary least squares methods. This method
is justified given the generally recursive nature of the price deter
mination process as indicated by the monthly causality analysis. A
major hypothesis to be tested with the monthly models was the existence
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