An application of maximum entropy estimation: the demand for meat in the United Kingdom

In many econometric studies of demand relationships the design matrix is fr equently subject to severe collinearity. In this paper the Generalized Maxi mum Entropy methodology is introduced and used to estimate a set of demand relationships. The ability of Generalized Maximum Entropy to estimate econo mic relationships that are typically subject to a high degree of collineari ty among the explanatory variables, thus potentially causing traditional me thods of estimation to be unreliable, is explained. The results derived by this alternative method of estimation, for a UK meat demand data set, are a nalysed and examined. The potential for this emerging estimation methodolog y is discussed.