A Normalized Quadratic Semiflexible Functional Form

Estimation of flexible functional forms for large consumer or producer demand systems is often precluded due to computational difficulties or due to a lack of degrees of freedom. We propose the concept of a semiflexible form, which is a special case of a flexible form but which requires fewer free parameters. Our proposed method of estimation allows the researcher to choose the degree of flexibility consistent with feasibility of estimation, while at the same time maintaining the concavity in prices property required by economic theory. In our empirical illustration we estimate a normalized quadratic semiflexible form using Canadian per capita time series data for ten consumer expenditure categories.