Prices and Quality Effects in Cross‐Sectional Demand Analysis

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Abstract
A conceptual clarification of the sources and meaning of cross‐sectional price variability is used to motivate a theoretical and econometric framework for the estimation of cross‐sectional demand functions. Quality effects are distinguished from supply‐related price variability to identify cross‐sectional demand for disaggregated food commodities. An empirical application using data from the 1977–78 Nationwide Food Consumption Survey indicates that parameter differences resulting from a failure to adjust cross‐sectional prices for quality effects are likely to be small for relatively homogenous, disaggregated food commodities.

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