New Economy Transport

Journal of Case Research in Business and Economics

“Where’s the Beef?”: Statistical Demand Estimation Using Supermarket Scanner Data

Fred H. Hays University of Missouri—Kansas City Stephen A. DeLurgio University of Missouri—Kansas City Abstract This paper is a case study designed for students and instructors in managerial economics and intermediate price theory courses. It utilizes a publicly available database of monthly supermarket scanner data for various cuts of beef. Linear multiple regression models are used to estimate price, cross, and income elasticities of demand. A log-linear model is also used to provide direct elasticity estimates. Keywords: (demand estimation, multiple regression analysis, scanner data, price elasticity, cross elasticity, income elasticity)

Where’s the Beef, Page 1

Journal of Case Research in Business and Economics

Background Virtually all microeconomic principles textbooks discuss the concept of elasticity of demand, the responsiveness of quantity demanded to a change in some other variable such as the “own” price of a good (price elasticity), disposable income (income elasticity) or the price of a related good (cross elasticity). Generally the ensuing discussion includes calculation of point price elasticity with a few limited examples. In some texts there also may be examples of the ranges of price elasticity for various consumer items. In the basic course it is unusual to address the question of how elasticity is calculated from a statistical approach. Managerial economics texts as well as some applied intermediate microeconomics texts take the discussion a step further by incorporating a summary of statistical applications of ordinary least squares regression to empirically estimate elasticity. A few limited data sets may be included either as examples or problems in the appendices or an accompanying course website. At times, these illustrations are contrived, leaving students, especially those in MBA or EMBA...