Learning Goal: I’m working on a economics question and need guidance to help me

Learning Goal: I’m working on a economics question and need guidance to help me learn.Section 2The fifile fulton.csv contains data on 97 daily price and quantity observations on fifish prices atthe Fulton Fish Market in New York City. Let ltotqty denote the natural logarithm of the totaldaily quantity of fifish sold at the market; and lavgprc, the natural logarithm of the average dailyprice for fifish at the market.Consider the following simultaneous equations model which imposes the equilibrium conditionthat demand equals supply:ltotqtyi = α1lavgprci + dow0iβ1 + U1i, (2)ltotqtyi = α2lavgprci + dow0iβ2 + β25wave2i + β26wave3i + U2i, (3)The vector dow contains a constant equal to 1 and four days-of-the-week indicator variables forMonday, Tuesday, Wednesday and Thursday (Friday being the omitted reference category):dowi = (1, moni, tuesi, wedi, thursi)0. The vectors β1 and β2 are conformable vectors of coeffiffifficients:β1 = (β10, β11, β12, β13, β14)0 and β2 = (β20, β21, β22, β23, β24)0. The variables wave2 and wave3 aremeasures of the wave heights over the past several days.The data was originally collected and analysed by K Graddy (1995), “Testing for ImperfectCompetition at the Fulton Fish Market,” RAND Journal of Economics 26, 75-92.8. Describe a mechanism by which stormy seas (as measured by higher waves) would decreasethe quantity of fifish sold at the market.9. Explain which is the supply equation and which is the demand equation according to youranswer to the previous question.10. Assume all variables in dow as well as wave2 and wave3 are exogenous, and that Cov(U1i , U2i) =0. Use the reduced form for lavgprc to explain why OLS estimation of Equation (2) andEquation (3) would not recover α1 or α2.11. Existence of the reduced form for lavgprc requires α1 = α2. Discuss whether this conditionis likely to be met in this application.12. Assume that all elements in β1 and β2 are difffferent from zero. For each equation, explainwhether it is identififiable in principle (i.e., if it meets the order condition), and if it is, whichspecifific conditions need to hold for it to be identifified (i.e., what is the rank condition for it).13. Would your answer to the previous question change without the assumption that all elementsin β1 and β2 are difffferent from zero? If no, explain brieflfly. If yes, give a specifific example forvalues of β1 and β2 that would change your answer to the previous question.14. Estimate the equation(s) which is/are identifified according to your answer to Question 12using 2SLS. Report the results of the fifirst stage(s) and second stage(s) in a table (coeffiffifficients,standard errors, sample size).15. Interpret the results:(i) Is/Are the rank condition(s) you described in Question 12 met?(ii) Interpret the estimated coeffiffifficient(s) on lavgprc.
Requirements: section 2   |   .doc file

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