I read your comment to mean that you skimmed the butter and margarine studies that we considered in our brief analysis, but please correct me if I misunderstood.
Yes, I agree that there is very little consideration for price endogeneity in the butter and margarine studies that we found. I could have made that more clear in our report. I suppose that oversight is due to the studies generally skewing older and using older methods. One of the meta-analyses we reviewed (Auer and Papies, 2020) included price endogeneity in their analysis, and they find a positive association between overlooking endogeneity and elasticity size. I do think there are other methodological issues that might be biasing these results—so accounting for price endogeneity may not remove all variation due to methodological issues—but I agree that including strong supply-side instrumental variables would be a nice standard practice.
Thank you for the reply. Indeed, I was referring to the studies engaging with butter-margarine substitution. However, I think it definitely needs emphasising just how weak those studies are and thus that they cannot be trusted to make any policy decisions. Additionally, while relevant, I would not want to use Auer and Papies (2020) as a basis for policy decisions either, as it is quite unclear how comparable those estimates are due to them pooling across a wide range of markets potentially quite different to this one (is the degree of product differentiation the same? groceries could be different to pharmaceuticals or durables). Finally, there is also the issue the papers they synthesise using instruments might not use good ones, but I do not have the time to check that.
Thanks for weighing in!
I read your comment to mean that you skimmed the butter and margarine studies that we considered in our brief analysis, but please correct me if I misunderstood.
Yes, I agree that there is very little consideration for price endogeneity in the butter and margarine studies that we found. I could have made that more clear in our report. I suppose that oversight is due to the studies generally skewing older and using older methods. One of the meta-analyses we reviewed (Auer and Papies, 2020) included price endogeneity in their analysis, and they find a positive association between overlooking endogeneity and elasticity size. I do think there are other methodological issues that might be biasing these results—so accounting for price endogeneity may not remove all variation due to methodological issues—but I agree that including strong supply-side instrumental variables would be a nice standard practice.
Thank you for the reply. Indeed, I was referring to the studies engaging with butter-margarine substitution. However, I think it definitely needs emphasising just how weak those studies are and thus that they cannot be trusted to make any policy decisions. Additionally, while relevant, I would not want to use Auer and Papies (2020) as a basis for policy decisions either, as it is quite unclear how comparable those estimates are due to them pooling across a wide range of markets potentially quite different to this one (is the degree of product differentiation the same? groceries could be different to pharmaceuticals or durables). Finally, there is also the issue the papers they synthesise using instruments might not use good ones, but I do not have the time to check that.