Consistent Aggregation in Fish Demand: A Study of French Salmon Demand

Abstract

Product aggregation levels in the seafood demand literature are normally selected based on the research objectives rather than on empirical tests. This study applies the Generalized Composite Commodity Theorem (GCCT) developed by Lewbel (1996), to test the aggregation of French household demand of salmon. The results indicate that demand for salmon can be aggregated based on product form (i.e., fresh, frozen, and smoked salmon). These composites can be further aggregated into a single salmon category. Salmon demand can, therefore, be estimated using a system which only includes salmon equations. The composite demand elasticities estimated by the AIDS model suggest that fresh and smoked salmon significantly substitute each other in the French salmon market. This means that the estimation of an import demand system that does not include smoked salmon cannot really explain real consumer demand. The results also suggest that wild salmon is playing in a different market niche than farmed salmon.

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