Estimating the U.S. Demand for Sugar in the Presence of Measurement Error in the Data

Inaccuracy in the measurement of the price data for the substitute sweeteners for sugar is a problem encountered in the estimation of the demand for sugar. Two diagnostics are introduced to assess the effect that this measurement error has on the estimated coefficients of the sugar demand relationship. The regression coefficient bounds diagnostic is used to indicate a range in which the true price responsiveness of consumers to changes in the price of sugar substitutes lies. The bias correction factor is computed to evaluate the magnitude of the overestimation of the responsiveness of the quantity of beverage sugar and nonbeverage sugar demanded to change in the price of sugar.