Estimating demand for competition analysis : A statistical exploration, and some possible applications

The Productivity Hub commissioned NZIER, along with Cognitus Economic Insight, to study how analysis of consumer demand can aid competitionanalyses.The purpose of the Project wasto will demonstrate the value of using an "Almost Ideal Demand System" (AIDS) approach to estimate household demand for a subset of key expenditure categories.The specific tasks we were commissioned to undertake were:

*to establish the feasibility of estimating demand in selected expenditure classes using administrative data available in New Zealand using the AIDS; and

*to explore the applicability ofthe AIDS modelestimates for competition and wider policy analyses.
The Project is exploratory, seeking to establish the feasibility of an estimation techniquedata. As such, the outputs of the model should be regarded as indicative only.