Substitutional relationships between rainbow trout and pansize salmon : a market demand analysis

The fundamental objective of this analysis was to isolate andidentify the factors governing the demand for domestically producedrainbow trout in a representative west coast market, and assess theimpact on that demand, if any, of the introduction of pansize salmon.The approach taken in this market demand study was to identify thosevariables hypothesized to determine supply and demand for rainbowtrout. Several testable hypotheses concerning the anticipated relationshipswere specified. It was hypothesized that a negative relationshipwould exist between the price of trout at the brokerage leveland the quantity demanded at that level. Conversely, the price oftrout at the wholesale level was hypothesized to be positively correlatedwith the quantity of rainbow trout demanded at the brokeragelevel. Further, the signs on the coefficients of variables accountingfor the wholesale prices of substitute items were expected to benegative, while comparable prices at the brokerage level should bepositive, based upon the hypothesis. It was hypothesized that thepresence of Japanese trout in the market place would have a negativeimpact on the quantity of domestically produced trout demanded.Personal disposable income was hypothesized to be positively correlatedwith the quantity of trout demanded. Expectations were thatseasonal factors tend to cause trout demand to fluctuate cyclically.An econometric simultaneous equations model was specifiedfrom which estimates of the parameters of the demand equation wereobtained using Two Stage Least Squares techniques. A recognition ofthe limitations associated with the available data set necessitates theemphasizing of the preliminary nature of these results.Data on quantities and prices of rainbow trout and equivalentprice series for hypothesized substitutes were obtained through personalinterviews with market participants and close observersthereof.The results of the study, while preliminary, tend to support theoriginal set of hypotheses concerning the interrelationships betweenquantity of domestic trout demanded and own-price, the price of closesubstitutes and seasonal demand fluctuations. Somewhat unexpectedly,the regression seems to have uncovered a negative income/quantitydemanded relationship for rainbow trout. This raises some interestingquestions which might best be addressed in terms of hypothesesfor future analysis.