Demand Analysis for Oysters

1. Demand Analysis for Oysters By Cheikhna Dedah, Walter Keithly, Hamady Diop, and Richard Kazmierczak Louisiana State University

2. Background • Consumption of raw oysters contaminated with Vibrio vulnificus bacteria can lead to serious illness and even death among individuals with weakened immune systems. • California, in response to health concerns, initiated a program on March 1991 which required mandatory labels on Gulf products. • The average annual deflated dockside price of Gulf oysters has fallen by approximately 40% since the introduction of the warning labels in 1991.

3. Warning Labels

4. Newspapers Headlines

5. Annual Deflated Dockside Oyster Prices by Region and Import Price (1980-84 base period)

6. Annual U.S. Oyster Harvests by Region and Annual Imports Oyster

7. Investigate the impacts of the mandatory warning labels and the associated media attention in a complete demand framework. Examine the cross-quantity substitution effects Objectives

8. Material and Methods The Inverse Almost Ideal Demand System (IAIDS) Model: i, j= Gu, Ch, Pa, Im wit is the expenditure share for oysters supplied from region i or imports at time t. qj is quantity of oyster per 1,000 people supplied from region j (or Imports) at time t. Q is the Laspeyres quantity index. θts is seasonal dummy variable . Vib is a Vibrio dummy variable. Trend is time trend variable.

9. Methods • The IAIDS model for Gulf, Chesapeake, Pacific, and imported oysters is estimated based on quarterly time series data covering the period 1985(1)-2003(4). • Homogeneity and symmetry restrictions are imposed on the estimated model.

10. RESULTS AND DISCUSSION

11. Estimated Parameters from the IAIDS Model for Oysters Note: seasonal shifts in the intercept are not reported in this table

12. Impact of Mandatory Labels • The mandatory labels and related media attention was estimated to: • Decrease the budget shares of the Gulf and Chesapeake products by 8.7-8.9% • Increase the budget shares of the Pacific and imported products by 8.5-9%

13. Impact of Mandatory Labels • An alternative model functional form which allows for a gradual decline in the effect of warning labels was also considered. • The Vibrio dummy variable was insignificant across all share equations when its starting period moved back or forth two or three years. • The parameters estimates were very stable after deleting the last five years of data from the analysis.

14. Uncompensated Price Flexibilities

15. Price Flexibilities • All own price flexibilities are negative as theoretically expected. • All cross price flexibilities were found to be negative which classifies all products as gross substitutes • The Gulf product was found to exhibit a relatively strong cross-quantity substitution effect with the imported and Chesapeake products.

16. Price Flexibilities • The Chesapeake product has very weak cross-quantity substitution effect with oysters from other regions. • The Pacific product was found to have a strong cross-quantity substitution effect with the Gulf, Chesapeake, and imported oysters.

17. Conclusions • The model results suggest a decline in the Gulf and Chesapeake shares by about 9% and a corresponding increase in the Pacific and import shares. • The Gulf, Chesapeake, Pacific, and imported oysters are gross substitutes. • The estimated cross price flexibilities suggest that the Gulf and Pacific products have strong quantity-substitution effects on other products.