An Inverse Demand System for Blue Crab in the Chesapeake Bay: Endogeneity and Seasonality

Abstract This paper studies the demand structure of the blue crab market in the Chesapeake Bay. In addition to providing empirical results regarding the economically important fishery, the paper offers a useful example of the potential for inverse demand system estimations for seafood where quantities are often defined prior to prices, and a variety of products are obtained from a single system. This is done with a nonlinear Inverse Almost Ideal Demand System coupled with seasonal patterns and controlling for endogeneity. The model used in this paper is able to address seasonality in demand in terms of varying flexibilities over seasons and deals with endogeneity in accordance with biological stock assessment data. Empirical results show significant season-varying market behaviors. The results also indicate the presence of endogeneity in the demand system. The flexibilities are calculated according to the estimates before and after controlling for endogeneity. Most market categories are price inflexible across seasons. The #1 Male, #2 Male, Female, and Mixed categories are necessities, while the Soft and Peeler category is a luxuary. Cross-category flexibilities suggest that most categories are quantity substitutes.