A demand analysis for the Japanese cod markets with unknown structural changes

We estimated the demands of Japan's cod and pollock markets, taking into account unknown structural changes. We used monthly wholesale price and quantity data between January 2004 and July 2013 at the Tsukiji market in Tokyo, Japan. Structural break tests detected multiple structural changes in the targeted period. A price-dependent demand model with detected structural changes successfully cleaned up the effects of the structural changes and estimated an accurate demand and elasticities. When structural changes were taken into account, the model fits improved by up to 17 points. The results indicated the one-way influence of cod on the pollock market. Also, the pollock market was sensitive to an economic recession, but household income did not affect pollock as well as cod, presumably because both goods are necessary goods for Japanese consumers. These results are helpful for policy makers in devising marketing strategies. Since fresh cod is an inelastic good, cod fisheries can reduce their cost by reducing their days at sea, which would increase the cod price due to its inelastic characteristics. As such, they can expect some profit via cost reduction and an increase in the price.