Heteroscedastic hedonic price model for cattle in the rural markets of central Ethiopia

Abstract

This study employs a heteroscedastic hedonic price model to examine the factors that influence cattle prices in the rural markets of central Ethiopia. The empirical results show that season, market location, class of cattle, body size and age are very important determinants of the cattle price. The relative weight of the phenotypic characteristics of the animals is among the highest of all the factors considered. These preferences at the farmers’ and farmer traders’ levels are the ones that matter most in shaping the diversity of animals kept at farm level, and the diversity of cattle genetic resources is quite essential for generating or identifying the best suited breeds of cattle, given the livelihood objectives of the target community.

Acknowledgements

The authors would like to thank ILRI-BMZ project for funding this research. We are also very grateful for all respondents and all those involved in collecting the two sets of data used in this article. The authors are solely responsible for the content of the manuscript.

Notes

¹ Taking the natural log of price as dependent variable makes the estimated coefficients approximations of the percentage price change associated with a unit change in the independent variable.

² According to Verbeek (2004), the immediate procedure in this case is to assume the heteroscedasticity to be of an unknown form and to modify the error terms accordingly. The regression analyses employed here therefore aim at addressing this heteroscedasticity.

³ We report only HC₂ and HC₃ SEs. Interested readers may contact the corresponding author for details.

⁴ We used STATA 9.2 SE's default convergence level of three stages iterative least square estimation.