The research reported here is part of the NBER's research program in Economic Fluctuations. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research.
This paper is concerned with the econometric problems associated with estimating supply and demand schedules in disequilibrium markets. Tbe general problem is that in the absence of aa 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 tbW 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 specitic assnm,,tion about pricwettin~ behatior,.and it allows the sample separation (into demand and supply regimes) to be estimated along with the ce.ztlMent estimates. The second and third methods use the change in price as a qualirotiue 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 arc used to estimate a model of the housing attd mortgage market in an effort to gauge the potential usefulnesr of each of the methods.
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