An Inverse Almost Ideal Demand System of Fresh Tomatoes in the U.S.

Previous studies of fresh market tomatoes in the U.S. have focused on the supply side and welfare effects of NAFTA. Very few studies have focused on the demand side, however, because fresh tomatoes do not have any close substitutes. In this study we draw on the fact that Mexican and Canadian fresh tomatoes may be close substitutes to U.S. fresh tomatoes. An Inverse Almost Ideal Demand System of the NAFTA fresh tomato market is estimated where fresh tomatoes differ by country of origin. The results indicate that NAFTA tomatoes are substitutable but the degree of substitutability varies widely depending on the season. Quantity changes in the U.S. fresh tomato market can result in significant retail price changes. This study has specific policy implications in light of the recent dumping conflicts between NAFTA members over fresh tomato trade.