MSU Agricultural, Food, and Resource Economics
The household maximization problem is solved to show that both the unconditional indirect utility and expenditure functions depend on the relative prices of the raw foods only through the costs of the dishes. Methods of estimation are discussed in detail, and the asymptotic distributions of the estimators are derived. The traditional model of food demand is shown to be a special case of this model, corresponding to the restriction of no dish choice effects. Means of testing for this restriction are provided. Finally, the elasticities of demand are derived and the policy implications of the model are discussed.