Effects of Price and Quality Differences in Source Differentiated Beef on Market Demand

In order to estimate demand elasticities of source differentiated beef in South Korea, this study used the quantity of an endogenous demand system derived through maximizing the economic welfare of market participants including local beef consumers and local and foreign beef suppliers. The demand system is then weighted with respect to quality adjustment parameters to identify the effects of quality differences in source differentiated beef on market demand. As implied by the high relative price of locally produced ‘‘Hanwoo’’ beef, substitutability between local and imported beef is shown to be very weak and the own price elasticity of South Korean beef is shown to be inelastic. Related to quality differences between source differentiated beef, South Korean beef consumers show a preference for Australian beef relative to U.S. and Canadian beef, perhaps due to BSE concerns.