CONFIRMATION AND FALSIFICATION OF EQUILIBRIUM DISPLACEMENT MODELS

One of the most important principles in any science is testing and consequently confirmation and falsification. In agricultural economics, the equilibrium displacement model is a popular modeling approach that presently is not testable and consequently cannot be confirmed or falsified. This paper presents four increasingly sophisticated procedures designed to overcome this limitation of equilibrium displacement models. An empirical illustration demonstrates the usefulness of these procedures in deciding between three alternative and theoretically viable equilibrium displacement models.