Causality in demand: A co-integrated demand system for trout in Germany

Max Nielsen (1) , Frank Jensen (1) , Jari Setälä (2) , Jarno Juhani Virtanen (3)

1 IFRO - Institute of Food and Resource Economics [Copenhagen]
2 Finnish Game and Fisheries Research Institute
3 Finnish Game and Fisheries Research Institute

This paper focuses on causality in demand. A methodology where causality is imposed and tested within an empirical co-integrated demand model, not pre-specified, is suggested. The methodology allows different causality of different products within the same demand system. The methodology is applied to fish demand. On the German market for farmed trout and substitutes, it is found that supply sources, i.e. aquaculture and fishery, are not the only determinant of causality. Storing, tightness of management and aggregation level of integrated markets might also be important. The methodological implication is that more explicit focus on causality in demand analyses provides improved information. The results suggest that frozen trout forms part of a large European whitefish market, where prices of fresh trout are formed on a relatively separate market. Redfish is a substitute on both markets. The policy implication is that increased production of trout causes a downward pressure on fresh trout prices, but frozen trout prices remain relatively unaffected.

Mots clés: Social Sciences & Humanities

Max Nielsen, Frank Jensen, Jari Setälä, Jarno Juhani Virtanen. Causality in demand: A co-integrated demand system for trout in Germany. Applied Economics, 2009, 43 (7), pp.797. ⟨10.1080/00036840802600038⟩. ⟨hal-00582234⟩