Agricultural and Marine Sciences, 8(2):55-61 (2003)
©2003 Sultan Qaboos University
Demand Elasticities of Fresh Fish
Commodities: A Case Study
A. Omezzine1, H. Boughanmi*2, and H. Al-Oufi3
1
Office of the Directorate General of Planning and Projects, Ministry of Agriculture
and Fisheries, P.O. Box 467, Muscat 113, Muscat, Sultanate of Oman
2
Department of Agricultural Economics and Rural Studies / 3Department of Marine Science
and Fisheries, College of Agricultural and Marine Sciences, Sultan Qaboos University,
P.O. Box 34, Al-Khod 123, Muscat, Sultanate of Oman
:‫ﻣﺮوﻧﺔ اﻟﻄﻠﺐ ﻟﻤﻨﺘﺠﺎت اﻷﺳﻤﺎك اﻟﻄﺎزﺟﺔ‬
‫دراﺳﺔ ﺣﺎﻟﺔ‬
‫ﻋﺒﺪاﷲ ام اﻟﺰﻳﻦ وﺣﺴﻴﻦ ﺑﻮﻏﺎﻧﻤﻲ وﺣﻤﺪ اﻟﻌﻮﻓﻲ‬
‫ ﺗﻬـﺪف هﺬﻩ اﻟﺪراﺳﺔ اﻟﻰ ﺗﻘﻴﻴﻢ ﻣﺮوﻧﺔ اﻷﺳﻌﺎر واﻟﺪﺧﻞ ﻟﻄﻠﺐ اﻷﺳﻤﺎك اﻟﻄﺎزﺟﺔ ﻓﻲ ﺳﻠﻄﻨﺔ ﻋﻤﺎن ﺑﺄﺳﺘﺨﺪام‬:‫ﺧﻼﺻــﺔ‬
.‫ ان ﻣـﺮوﻧﺔ اﻟﻄﻠـﺐ ﺗﻮﻓﺮ ﺑﻴﺎﻧﺎت ﺗﺴﻮﻳﻘﻴﺔ ﻣﻬﻤﺔ ﻷﺻﺤﺎب اﻟﻘﺮار ﻓﻲ اﻟﻘﻄﺎﻋﺎت اﻟﺤﻜﻮﻣﻴﺔ واﻟﺨﺎﺻﺔ‬.‫ﻃـﺮﻳﻘﺔ اﻟﻤﻌﺎدﻟـﺔ اﻟﻔـﺮدﻳﺔ‬
‫وﺑﻴﻨـﺖ اﻟﻨـﺘﺎﺋﺞ ان ﻣـﺮوﻧﺔ اﻷﺳـﻌﺎر واﻟﺪﺧﻞ آﺎﻧﺖ ﺻﻐﻴﺮة وﻟﻜﻦ ﻣﻮﺟﺒﺔ ﺣﻴﺚ ﺗﺸﻴﺮ اﻟﻰ ان اﻟﻄﻠﺐ ﻋﻠﻰ اﻷﺳﻤﺎك ﺳﻴﺴﺘﻤﺮ‬
‫ آﻤﺎ ﺗﻤﺖ ﻣﻨﺎﻗﺸﺔ أﺳﺘﻬﻼك‬.‫ﻓـﻲ اﻻرﺗﻔـﺎع ﺑـﺰﻳﺎدة اﻟﺪﺧﻞ ﻣﻤﺎ ﻳﻤﺜﻞ داﻓﻊ ﻗﻮة ﻟﺘﻨﻤﻴﺔ اﻟﺴﻮق وﺗﺤﺴﻴﻦ اﻟﻜﻔﺎءة اﻟﺘﺴﻮﻳﻘﻴﺔ‬
‫اﻷﺳﻤﺎك ﻟﻜﻞ ﻓﺮد ﻋﻠﻰ اﻟﻤﺴﺘﻮى اﻟﺒﻌﻴﺪ ﺣﻴﺚ اوﺿﺤﺖ اﻟﻨﺘﺎﺋﺞ اﻟﻰ ان اﻷﺳﺘﻬﻼك اﻟﻔﺮدي ﺳﻴﺴﺘﻘﺮ ﻟﻜﻦ ﺳﺘﺘﻐﻴﺮ اﻟﺘﺮآﻴﺒﺔ‬
. ‫ﻟﺼﺎﻟﺢ اﻟﻤﻨﺘﺠﺎت اﻟﺴﻤﻜﻴﺔ ذات اﻟﻘﻴﻤﺔ اﻟﻌﺎﻟﻴﺔ واﻟﺘﻲ ﺗﻌﺘﺒﺮ ﻗﻄﺎع ﺗﺴﻮﻳﻘﻲ ﻣﺮﺑﺢ ﻟﻠﺸﺮآﺎت اﻟﺴﻤﻜﻴﺔ اﻟﻌﻤﺎﻧﻴﺔ‬
ABSTRACT: The objective of this paper was to estimate price and income elasticities of fresh fish commodities using
a single equation estimation procedure. Demand elasticities consitute relevant market information for policy decisions
for both the private and the public sectors. Results of a case study from Oman, an Arabian Gulf country, showed that
income and price elasticities were small but positive, indicating that fish demand will continue to increase with
growing incomes, a driving force for market development and marketing efficiency. It was argued, however, that in the
long run per capita fish consumption will stabilize but its composition will shift toward high value added products, a
profitable market segment for Omani fish businesses.
Keywords: Oman fisheries, marketing, fish consumption.
T
he fisheries sector is an important focus for small
fisherman and traders development in Oman, one
of the Arabian Gulf countries. It has a potential
contribution to economic development in terms of
employment and revenues, food security and export.
Long term objectives of sustainability of this potential,
however, will depend on market development and
performance and, production growth (MAF, 2002). Yet,
the available marketing network for fish products is far
from promoting these objectives (Omezzine, 1998 ).
Production growth, although dependent on fish
population related factors, is also affected by market
signals reflecting both demand and supply
conditions, and the way producers respond to
changing consumer demands. Likewise, the
promotion of an efficient distribution system capable
of meeting consumers needs in place, time and
product form requires market information.
Recent studies on fish marketing in Oman
(Omezzine, 1998; Al-Jabri,1999; MAF, 2001; MAF,
2002) identified various sources of market
development for fish products. Market information
is a recommended potential source common to all of
these studies. Market demand related factors are
hypothetically implicit elements of policy decision in
both the public and the private sectors.
Demand prices and income elasticities have
significant influence on decisions related to public
assistance, extension programs, market improvement
and price programs. Information on consumer behavior
helps to locate demand in place, time and form of
the product. Inadequate information on market demand
________________
*Corresponding author.
55
OMEZZINE, et al.
TABLE 1
for various fish species has proved to be a limiting
factor in market development, a source of low returns
to fishing and fish distribution activities (MAF, 2002)
and a constraint to efficient operation of market
agents.
Previous studies on fish consumption have
concentrated on consumer attitudinal factors and their
impacts on the choices and preferences between
species, forms of product, buying outlets, quality and
quantity (Herrmann et al., 1994; Gempesaw et al.,
1995; Houston et al., 1996). The focus has been on the
effects of relative price perceptions and socio-economic
and demographic characteristics on household
preferences for fresh fish products. A remarkable
amount of information is available on consumers
preferences with respect to species, product form and
nature, place of buying and other fish attributes such as
freshness, odor and attractiveness. This information,
while very important to make production and marketing
decisions, is aimed primarily at identifying impacts of
behavioral and attitudinal factors on market dimensions
without revealing the quantitative impacts on demand
variations as well as the relationships between the
quantity demanded and its determinants, specifically
demand prices and income elasticities.
The current study addressed the future need for
market information and specifically consumer demand
for fresh fish products in Oman. It focused on consumer
responsiveness to changes in price and income.
Specifically, time series data were used to estimate
demand price and income elasticities for various
demarsal and pelagic fish species. Principles of demand
theory were used to identify key consumption patterns
that explained household buying behavior and
determined the nature of the relevant elasticities.
Production, export and consumption of demersal and
pelagic species in Oman.
Fish Type
% of
Domestic
% of
% of
Export
Landings
Total Consumption
Total
Total
(tons)
(tons)
Export
(tons)
Consumption
Landing
Demersals 24422
Pelagics
76571
21%
71%
2341
41851
5%
90%
24081
34720
33%
47%
Source: Compiled by authors from Fishery Statistical Year Book 2000,
MAF, Oman.
which has a direct effect on the consumers desire and
willingness to spend more on fish. Field observations
reveal that fish demand is growing in all parts of the
country. Total consumption of fresh fish increased by
around 12000 tons during the period 1985 to 1997. A
remarkable decrease in quantities demanded occurred
during the period 1999 to 2000 (Table 2) due
essentially to decreased landings and growing exports
to the European Union.
Fish is sold to consumers in various outlets.
However, the main fish outlets are fishermen-first
handler-consumers markets known as on-shore markets
at landing points (Omezzine, 1998). Other outlets such
as retail fish shops, supermarkets and recently door to
door distributors are deemed less important. While they
are well developed in the capital area, they do not yet
capture a significant share of the market. Fish is
consumed all year long, although there are no special
occasions celebrated with fish consumption like meat.
There is evidence of a significant tendency towards
increased fish consumption in the urban regions (AlMazrooei et al., 2003).
Many studies on dietary habits in the case study
area indicate that consumers prefer fresh vegetables,
fresh fruits, fresh meat, and fresh fish. Houston et al.
(1996) contends that freshness is the primary concern
of consumers. The same authors indicate that consumer
appetite for seafood seemingly yearns for little variety.
Consumers treat favorite large fish with discrimination
from name, appeal, recognition and appearance.
Frozen fish have a very thin market in Oman
(Ingvarsson, 1988). A recent study (Al-Mazrooei et al.,
2003) indicates that fish consumers in the coastal regions
Trends in Fresh Fish
Consumption in Oman
Fish products
are considered an important
component in the Omani consumer food diet. Total
consumption of sea food products reached more than
57000 metric tons (MT) in 2001. Per capita consumption
reached more than 30.2 kg in 2000 (MAF, 2001).
Demersal and pelagic fish represent approximately
21% and 71% of total landings (Table1).
Local
consumption of demersals and pelagics represented,
respectively, 33% and 47% of the total consumption of fish.
The volume of fish business at the local market
level is currently estimated at around RO 35 millions
(91 million USD) and expected to increase with planned
expansion of tourism and population growth to reach
more than RO 50 million (130 million USD) by year
2010 (MAF, 2000). Annual per capita expenditures on
fish products account for around RO. 13.5 (35 million
USD) representing about 5.6% of total food expenditures
annually (MNE, 2001). Moreover, there is evidence of
consumer awareness of health benefits of food consumption,
TABLE 2
Trend in local consumption of seafood in Oman 1985-2000.
Year
1985 1989
Consumption
70.0
(1000Mt)
Per-Capita
34.0
consumption (kg)
1991 1993 1995 1997 1999 2000
77.4
78.3
78.6 80.8 82.5 63.1 74.0
37.0
37.0
36.0 35.8 35.6 27.4 30.2
Source: local consumption is compiled from data on production , exports
and imports in Fishery Statistical Year Book 2000.
Per capita consumption is total consumption divided by population.
Population is taken from Statistical Yearb Book, Ministry of National
Economy.
56
DEMAND ELASTICITIES OF FRESH FISH COMMODITIES: A CASE STUDY
foster the internationalization of fish processing in the
study area (Zaibet et al., 2003).
have shown a significant preference to on-shore
markets as a place for buying fish. The population in
the inland areas, however, have no choice but to buy at
fish retail markets and fish company outlets that are
available in many locations in the interior. The same
study showed that whole fish is the preferred form of
purchase for urban and rural consumers while high
income people in urban areas prefer to buy other forms
of fish such as slices and fillets from market.
Theoretical Background
in Demand Modeling
Consumer demand is usually taken to mean the
array of different quantities that consumers would
purchase under alternative sets of circumstances during
a given time period. Market demand for a product or a
group of products is the aggregated demand for a large
number of consumers. Market demand for a fish
product or group of products is the logical extension of
the theory of household behavior.
Economic theory identifies four major factors that
influence the quantities demanded by consumers. These
are the price of the product, the prices of other
products, consumer income, and the pattern of taste and
preferences. However, a complete list of the main
factors influencing market demand may include the size
of the population and the consumer income distribution
over this population (Riston, 1976).
The usual mathematical presentation of demand is
of the following form:
Fish Market Structure
Among the salient structural characteristics of the
fishery industry in Oman is the coexistence of a large
traditional sector along with a small commercial
export-oriented sector. Fishing in the traditional sector
is a family operated activity with limited capital and
management operational requirements (basic fishing
gear). However, it is responsible for 75-85% of total
fish landings in the country. The commercial sector is
made up of large foreign fishing vessels rented by
private fish processing and export companies. In 2000,
four companies rented 10 trawlers and 18 long liners
and caught 12400 tons of fish (MAF, 2000).
The predominance of the traditional sector,
however, has exercised a strong influence on the
development of markets and marketing systems in
Oman. Prominent among these are the on-shore fish
markets in which most of the landing and selling take
place and where fisherman, retailers, wholesalers,
truckers, processors and consumers meet. Truckers are
the most important agents in these markets in terms of
transaction volume. They play an important role in
transferring the products from the landing sites to the
interior regions and neighboring countries such as
United Arab Emirates, Qatar and Saudi Arabia. Onshore fish markets are considered to be fairly
competitive given the large number and the small size
of buyers and sellers. Price discovery consists of the
fisherman setting an initial price that is adjusted
through negotiation (Omezzine, 1998).
The export market is well established and
constitutes a strong competing outlet to the domestic
market. In 2000, the export market absorbed 39% of
total fish production, mostly destined for GCC
countries (72%) while Europe and Asia have accounted
for 13% and 8% of the total fish exports, respectively.
The European market is more stringent in terms of
quality standards than the GCC market. Export demand
sharply declined during 1997-1998 following the
European ban imposed on Omani fish export due to
concerns about safety and quality standards. This ban
generated a collective effort from private companies
and the government to make significant changes in the
production processes of fish so as to enhance quality
and safety standards. The ban played a driving force to
Qi = f ( Pi, Pj, Y, N, T)
(1)
where Qi is the quantity demanded of a particular
product i; Pi is the own price of the product; Pj stands
for prices of substitutes or complements; Y is the
consumer income; N is the population size; and T is a
set of all other variables that may have direct effect on
demand.
The choice of a particular demand model for
estimation purposes automatically involves theoretical
restrictions (Philips, 1974). Demand functions have to
satisfy the theoretical plausibility of the demand
equation and the general restrictions of the theory of
consumer demand. Economic theory requires income to
be included together with prices in an equation
representing a demand function. Moreover, economic
theory suggests that demand for a commodity (i) is a
homogenous function of degree zero of its own price,
the prices of all other commodities and of consumer
income. To satisfy this homogeneity condition, prices
are relative and income is real. Demand functions are
also subject to Engel aggregation symmetry and
Cournot aggregation conditions.
Studies of consumer demand have relied on many
procedures and modeling schemes. Some have relied
exclusively on self reporting of purchase behavior and
attitudes, and others on direct observation of consumer
behavior at retail markets. However, most demand
studies have used time –series and cross- sectional data
on quantities, expenditures, prices, and incomes to
determine consumer response to prices and income
changes.
57
OMEZZINE, et al.
stated as consumers’ demand elasticities. Own price
elasticities of demand is the relative change in quantity
demanded as a result of a 1% change in the price of the
product. Given the inverse relationship between prices
and quantities demanded, own price elasticity of
demand of normal goods is expected to be negative.
Moreover, a common characteristic of food products
shown in empirical studies is that price elasticity of
demand is less than absolute value of one (Nerlove and
Addison, 1958; Philips, 1974). Likewise, income elasticity
of demand measures the proportionate change in
quantity demanded resulting from a 1% change in
consumer income. The usual relationship between
income and quantity demanded may be positive,
negative or zero depending on the nature of the product
(Ritson, 1977; Johnson et al., 1983). In general, income
change has a positive impact on the quantity demanded
for most food stuff. However, empirical studies have
shown that many food products have positive income
elasticities and of value less than one indicating that an
increase in income is associated with a less than
proportionate increase in the quantity demanded of the
product (Ritson 1977; Johnson et al., 1983; FAO,
2000).
Cross elasticity of demand is the relative change in
the quantity demanded of a product that results due to a
1% change in the price of other products (substitutes or
complements). Empirically, most food products are
substitutes for one another. Fish have many other
protein-rich food stuff substitutes, specifically meat and
poultry. Elasticity of substitution is then positive and
empirical studies have shown that for most food
commodities it is less than one (Nerlove and Addison,
1958).
The identification of demand functions is examined
through Theil’s theory and measurement of demand
(Theil, 1975, 1976), Stones measurement of consumers
expenditures and behavior (Stone, 1954), the linear
expenditures system (Pollak and Wales, 1978), the
Almost Ideal Demand System (AIDS) (Deaton,1980),
and the inverse AIDS (Eales and Unnevehr,1991).
Empirical measures of demand have used
constrained maximization of consumers’ utility
function approach or direct specification of demand
equation based on available information. The utility
function approach provides demand functions for all
products and services consumed subject to consumers
budget constraint.
The usual form of the empirical demand function is
as follows:
Qit = a1 + a2 Pit + a3 Pjt + a4Yt + eit
(2)
where Qi is per capita consumption of product i; Pi and
Pj are own and cross prices respectively; Y is per capita
income; and eit is the error term that subsumes the
impact of all the other variables not included in the
model.
This model specification is based on the implicit
assumption of unchanged preferences. Alternative
specification to account for continuous change in other
variables than prices and income include the
introduction of a time trend. Thus, the representation of
the demand function in Equation (2) includes a time
variable to account for all variables that may have an
impact on consumer quantity purchased over time.
Consumer taste is the most targeted variable in this
change.
Direct specification of the demand function can be
done using information available on the product
market, the production cycle and the use of the product.
It draws heavily on prior information on the product
and the market. Empirical estimation of these demand
functions emerges from a hypothetical a priori model
specified according to the available information on
consumption and factors having direct effects on
consumer decisions to buy.
Estimation of demand functions through directly
specified equations may use either a single equation or
simultaneous equation systems. Single equation
dependent models are the easiest to estimate and may
be used when all the product moves through a single
outlet and the quantity sold is determined mainly by
economic factors operating prior to the marketing
season (Fox, 1952). Simultaneous equation demand
systems are recommended in cases where economic
data are generated by systems of relations that are
stochastic, dynamic and simultaneous (Marschek,
1950).
Implicit to demand function is the measurement of
consumers’ response to changes in prices and income
Price-Dependent Versus
Quantity-Dependent Modeling Issues
Past studies on fish demand analysis have used
either a price dependent or a quantity dependent
relationship, depending on which variable is considered
to be exogenous. In the price dependent equation,
quantity supplied is treated as exogenous and vice
versa. The rationale for treating the quantity as
exogenous is that landings are considered to be
determined by biological and managerial conditions
rather than by market conditions (Burton, 1992). It is
argued that fishermen catch what they can get and land
the catch whatever the price. That is supply of fish is
determined mostly by non-price factors. The choice of
a price dependent model is not uncommon in seafood
demand analysis, where one is actually estimating an
inverse demand function rather than a direct demand
function. If the variables are expressed in logarithms,
then the estimated coefficients are interpreted as own
price flexibility and cross price flexibility. The inverse
of price flexibility is taken as a measure of a lower limit
58
DEMAND ELASTICITIES OF FRESH FISH COMMODITIES: A CASE STUDY
TABLE 3
(in absolute sense) of the price elasticity as the
reciprocal depends on the cross flexibility coefficients
(Asche and Bjorndal, 2001) .
If supply predetermines price, a direct demand
function
treating price as exogenous, is more
appropriate. It is often argued that the supply is more
variable than the demand leading to models where
prices are predetermined. Another rationale for price
predetermined models is that fish prices are set by
suppliers based only on cost considerations,
independent from consumption (Theil, 1975). Although
the simultaneity bias is acknowledged, there is a
tendency that most recent studies use quantity
dependent specifications and demand systems (Asche
and Bjorndal, 2001). This specification is judged to be
more approriate in the case of this study as Oman is a
fish exporting country and the conditions in the export
market could affect supply conditions in the domestic
market. Furthermore, Oman is one of many sellers in a
large international market with no influence on export
prices. This point can be taken as a justification of the
use of a quantity dependent equation, although there is
a simultaneous bias involved in the specification of a
single equation model.
Demand elasticities analysis for fish products.
Product
Intercept
Income
Cross
Elasticity Elasticity
R2
Fish Products
All
Demersals
4.123
(1.321)
Sea Bream
80.201
(-2.53)
-.639**
.938**
(1.921)
1.932**
1.108
(Beef)
1.638
(Chicken)
(2.03)
Grouper
-3.12
(-1.101)
1.002
(-0.935)
1.732**
(1.930)
-
Emperor
-2.138
(.809)
-.656
(-1.601)
2.025**
(1.925)
-
All Pelagic
-3.20
King Fish
3.70
(2.701)
Sardines
-.292
(-0.817)
All Fish
-12.301
-.581**
.792**
-2.32**
(1.938)
1.908*
(2.813)
-
.412** -1.391*
(-1.92)
(-2.902)
-
(2.011)
(2.701)
(.48)
(.71)
0.985
(All meat) (.87)
(1.301)
(2.301)
.597*
(.58)
(2.91)**
(-2.012)
-.413**
(.62)
(1.529)
(-1.871)
(-1.023)
This study has used single quantity dependent
models as specified in Equation 1. It is assumed that
buying decisions of seafood products can be separated
from the purchase of other food commodities by
imposing weak separability on the utility function
(Blackorby et al., 1978). Demand equations were
specified for five different fish species together with
all fish, demersals and pelagics. All equations where
estimated in logarithmic form so that paramaters (ai’s)
are direct measures of demand elasticities. The general
form of these estimated demand functions is as follows:
-.289*
(2.350)
(-1.20)
Model Specification and Data
LogQi = a0 + a1logPi + a2logPs +a3 logPc
+ a4logY + e
Own Price
Elasticity
(.81)
(.62)
.538
(All meat) (.73)
(1.209)
( . ) t- values.
*Significant at 10% level.
**Significant at 5% level.
***Significant at 1% level
consumer price index available in the monthly and annual
reports of the Central Bank of Oman.
Results and Discussion
Results from OLS regressions for the specified
model for demand functions showed that all estimated
coefficients agree with a priori theoretical expectations
(Table 3). Most coefficients were statistically significant
at the 5-10% range. The coefficient of determination (R2)
ranged from 48% and 87%. The low explanatory power
in some equations could be explained by the omission of
non price variables such as habit formation. However,
the overall significance of all regression equations was
high as indicated by the calculated F test. The most
obvious characteristic of these results was that the
majority of the coefficients of prices were between 0
and –1, indicating that for most selected fish products a
proportionate change in prices will result in a less than
proportionate change in the quantity demanded. They
were also consistent with another normal characteristic
that the demand for a group product is less elastic than
individual products. Price elasticities of “all demersals”
were lower than individual demersal species. Few
exceptions to this rule were found in pelagics where
price elasticity of sardines (0.412) was less than price
(3)
where Qi is the quantity demanded for the ith
commodity; Pi is the purchase price of the ith
commodity; Ps is the price of the substitutes; Pc is the
price of the complements; Y is the consumers per
capita income; and e is a stochastic error term.
Annual data on quantities consumed and consumer
prices, for selected fish products were collected for the
period of 1985-2000 from the fish statistical yearbook
at the Ministry of Agriculture and Fisheries. This is the
only period where data was available and of good quality.
Data on consumer disposable income was collected from
the Statistical Year Book of the Ministry of Economy.
Prices of substitutes and complements, specifically meat
and poultry products, were collected from the Ministry
of Commerce. Prices and income were deflated by the
59
OMEZZINE, et al.
elasticity of the group of pelagics (0.581). This may be
explained by the nature of this fish specie as well as
the consumers’ buying decision.
Given an inelastic demand, an increase in supply of
fish has a much higher depressing effect on prices and
revenues than would be the case if demand is elastic.
Income elasticities were positive except for sardines
(-1.391). This seemed to be an inferior good. Sardines
are a low-price fish product, mostly consumed by lowincome people who substitute high-value fish with
sardines. Demand for grouper, sea bream, emperor and
kingfish were income elastic, as reflected by their income
coefficients larger than one. These species are known to
be highly valued in the Omani society and can be looked
at as luxuary goods for many consumers.
Fish were related to other food commodities in
consumer decisions. Particularly, it seemed that fish
was a substitute for meat, though not statistically
significant, as indicated by the positive cross price
elasticities. As beef price increased, fish consumer then
tended to substitute fish for beef. At a finer level,
chicken constitutes a good substitute for Sea Bream fish
species and was significant at the 10% level (Table 3).
It is interesting to note that the degree of
aggregation in the definition of the product to be
analyzed influenced substitutability and therefore the
value of own price elasticities. The aggregate “All
Demersal”, for example, had a lower price elasticity
(0.289) than the various species of demersal (Sea
Bream, Grouper, Emperor). This was in conformity
with economic theory, which postulates that the
demand for an aggregate product is less elastic than its
components because aggregation reduces the number of
substitutes that compete for consumers’ budget. The
same aggregation issue applied to the category “All
Fish” compared to various fish species.
Demand elasticities for a particular country
provides valuable information for policy analysts in
understanding the pattern of growth of the national food
consumption. Specific country elasticities are
influenced by both the level of income attained (wealth)
and the quantities of fish that are currently eaten by the
average consumer (FAO, 2000). Fish has been a staple
food since ancient times. Per capita consumption has
grown to reach a current level of 30.2 kg/year, which
places Oman among the high fish consuming countries
in the World. At this level, per capita fish consumption
in this study area was higher than all OECD countries,
except Japan (72.1 kg/yr) and Norway (43.1 kg/yr).
Given the positive income elasticity for fish (0.597),
per capita fish conumption will continue to grow.
However, as income and per capita consumption
increase, the expected growth of fish consumption will
be slow and a long-term ceiling will be established. The
composition of fish consumption may, however, change
in favor of more high-value products.
There is some evidence that the consumption
ceiling was reached for high-income countries where
fish consumption was above the world average (FAO,
2000). Studies for fish consumption in Japan, for
example, indicated that fish, on the aggregate, was
already an inferior good with income elasticity equal to
-2.6. However, consumption remained stable because
the quantities consumed in restaurants and ready-to eat
products increased (FAO, 2000).
The growth of fish consumption (gc) in the short
term can be estimated using the following formula,
based on estimated income elasticity (η), population
growth (gp), per capita income growth (gi), and
assuming that fish prices are stable:
gc= gp+η. gi
(4)
Accordingly, and as a rough estimate, fish
consumption for the next five years in Oman is expected
to increase at an annual rate of 3.75%, given an estimated
per capita income growth of 3% (MAF, 2000) and a
population growth of 2% (World Bank, 2000).
Consumer responsiveness to changes in fish prices at
the aggregate is affected by the availability of substitutes
but also by the commodity budget share. Price elasticities
are low for those commodities that represent a small
proportion of the household budget. The 1999 household
expenditure survey conducted indicated that households
in the study area, on average, allocated 6% of their food
expenditure on fish and sea products compared to a
budget of 17% for meat and poultry, and 11% for dairy
products and eggs. However, fish expenditure will most
likely to go up as income increases and households
substitute high value fish products for the lower ones.
The budget share patterns will depend on the relative
income and price elasticities for various related food
groups particularly meat, poultry and eggs.
Conclusions
An OLS independent single equation model was used
to estimate demand price and income elasticities for
selected fish species in Oman. Income elasticities for all
species were positive, except for sardines, indicating that
demand for fish products will continue to increase with
growing real income and population. The important
implication of this growth in demand for fish products
will contribute to a strong need for market improvement,
for efficient distribution and, therefore, to higher returns
to fishing and related business. Price elasticities for all
species were less than one, except for kingfish, indicating
that fish product demand was price inelastic.
The implication of this information for fish producers
and investors is that an increase in the supply of fish,
ceteris paribus, has a much higher depressing effect on
revenue than if demand was elastic. However, the
60
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depressing effect will be significantly attenuated as fish
demand is expected to increase at 3.75% annually due to
the combined effect of income and population growth.
Over the long run, per capita consumption of fresh
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market segment.
In future research, fish consumption needs to be
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better the income constrained behavior of consumers and
the pattern of substitutability and complementarity
between fish and non fish products. Furthermore, there
is a need to incorporate the socio-economic and
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______________________________________________________
Received December 2002.
Accepted July 2003.
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