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Comment by hnmullany | Hacker News Reader

So, basically, there are price assymmetries (BLS sticker price data), but consumers adjust the mix of cuts of beef they buy in favor of cheaper cuts (scanner data) so the overall effect is to produce something that looks like symmetry?

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That's right. It matters if you're talking about "price" as the price on the product or the price consumers pay.

How does product substitution work in practice given that a cow has fixed anatomy?

If a farm price shock leads to a BLS sticker price increase, but consumers buy $10 of chuck instead of $10 filet mignon, where do the filets go?

If price transfers are symmetric, does this mean there is a time after the same shock where customers are substituting the inverse?

Presumably the meat packers can't hold the filets in inventory indefinitely

I asked my coauthors this question when they asked me to join. Consumer beef purchases are only one of the markets. If there's a reduction in the amount of beef on the market, that might be absorbed at the high end by consumers, so that others (particularly restaurants) continue to get the good cuts. Consumers substitute into product that would otherwise be used for something like hot dogs.

That's a fascinating and complex system. That suggests that restaurant consumption is relatively fixed as well but quality of cut is flexible at the lower margin. I wonder if there's any way to analyze the whole picture. I suppose that would require insight into the total sales of processors, which may or may not be proprietary.

I also wonder if the quality adjusted analysis for Consumer consumption would show a different price sensitivity to shock for high-end cuts in the market

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