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[position in research by subject]
"Methods of Estimation for Markets in
Disequilibrium," (with D. M.
Jaffee), Econometrica, May 1972, 497-514.
This paper is concerned with the econometric problems associated with
estimating supply and demand schedules in disequilibrium markets. The
general problem is that in the absence of an equilibrium condition the
ex ante demand and supply quantities cannot in general be equated to the
observed quantity traded in the market. Four methods of estimation,
differing primarily in their use of information on price-setting behavior,
are developed in this paper. The first method is a generalization of
an earlier method developed by R. Quandt and is based upon the
maximization of a likelihood function. The method does not require any
specific assumption about price-setting behavior, and it allows the sample
separation (into demand and supply regimes) to be estimated along with the
coefficient estimates. The second and third methods use the change in price
as a qualitative proxy in determining the sample separation.
The fourth method uses the change in price as a quantitative
proxy for the amount of excess demand (supply) in the market. In the
final section of the paper the four methods are used to estimate a model
of the housing and mortgage market in an effort to gauge the potential
usefulness of each of the methods.
This paper led to a fairly large literature on "disequilibrium"
econometrics. On request I distributed the housing data used in this
paper to many others, and many of the examples in the literature are based
these data. My other paper in this area (with H.H. Kelejian) is
1974#2. Also, the model of housing starts in
this paper is part of my forecasting model--see Chapter 8 in