A procedure is demonstrated for estimating market‐level demand elasticities from household data suffering from sample selectivity problems. The procedure uses McFadden's nested multinomial logit model and is applied to the natural Christmas tree market. Results indicate that the own‐price elasticity of natural Christmas trees is −0.674 and the cross price elasticity of natural Christmas trees with respect to artificial Christmas trees is 0.188. These are the first known demand elasticity estimates for the natural Christmas tree market.
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Davis et al. (1993) studied this question.
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