This article focuses on causality in demand. A methodology where
causality is imposed and tested within an empirical co-integrated demand
model, not prespecified, is suggested. The methodology allows different
causality of different products within the same demand system. The
methodology is applied to fish demand. On the German market for farmed
trout and substitutes, it is found that supply sources, i.e. aquaculture and
fishery, are not the only determinant of causality. Storing, tightness of
management and aggregation level of integrated markets might also be
important. The methodological implication is that more explicit focus on
causality in demand analyses provides improved information. The results
suggest that frozen trout forms part of a large European whitefish market,
where prices of fresh trout are formed on a relatively separate market.
Redfish is a substitute on both markets. The policy implication is that
increased production of trout causes a downward pressure on fresh trout
prices, but frozen trout prices remain relatively unaffected.