Measuring Structural Changes in Iranian Livestock Product Consumer Preferences: A Seasonal Time Series Analysis with Emphasis on Economic Shocks

Introduction: The livestock sector is of strategic importance as one of the key pillars for supplying protein and ensuring food security in the country. Animal products play a crucial role in community food security and account for a significant share of Iranian households' food expenditure basket. Therefore, price volatility in these products has always been a major concern for policymakers, and understanding consumer preferences is essential for grasping the nature of consumption changes and adopting appropriate policy measures. From the perspective of economic theory, consumer behavior is based on the assumption of rationality and stable preferences; meaning that any change in the consumption pattern of a good is merely a reaction to changes in price and income, and not a change in the structure of preferences. However, the exposure of the Iranian economy to severe macroeconomic shocks in recent years (including the US withdrawal from the JCPOA in 2018 and the COVID-19 pandemic) has challenged this fundamental assumption, subjecting livestock product consumption patterns to observable and structural changes. The core research question is thus raised: Are the observed changes in consumption patterns merely a rational response by consumers to budgetary constraints and external shocks, or do they indicate a structural break and a change in their underlying food preferences? The main objective of this research is to measure the rationality and stability of preferences for the livestock product basket (Red Meat, Chicken, Eggs, and Milk) and to identify the precise timing of structural breaks in consumption patterns, in response to major shocks such as the US withdrawal from the JCPOA and the COVID-19 pandemic. The key innovation of this study lies in seasonal disaggregation and conducting the structural break test using the Kruskal-Wallis (K-W) Statistic separately for warm and cold seasons.
Materials and Methods: This study utilizes quarterly data for the livestock products basket (Red Meat, Chicken, Eggs, and Milk) spanning the period from Spring 2015 to Winter 2022. Price and per capita consumption data for the four aforementioned products were calculated and extracted from official sources, including the Joint Stock Company for the Support of Livestock Affairs. To test the stability of consumer preferences, the non-parametric approach of the Weak (WARP) and Strong (SARP) Axioms of Revealed Preference was employed. This approach is independent of any specific functional form assumption and solely tests the consistency of the data with the condition of rationality. Initially, preference consistency was assessed across the entire period by calculating the Dual Matrix. Subsequently, the non-parametric Kruskal-Wallis (K-W) Statistic was used to determine the precise timing of instability and structural breaks. The structural break analysis using the K-W statistic is performed separately for warm seasons (Spring and Summer) and cold seasons (Autumn and Winter). This methodological disaggregation is essential to ensure that climatic effects on consumer behavior are not mistakenly interpreted as violations of the axioms or structural breaks, and that the observed results reflect only the impact of macroeconomic shocks on demand.
Results and Discussion: The results of the preference consistency tests indicate that consumer behavior exhibited 6 pairs of violations of the Weak Axiom of Revealed Preference (WARP) and 188 pairs of violations (equivalent to 38%) of the Strong Axiom of Revealed Preference (SARP). This high volume of contradictions in SARP confirms that consumer behavior throughout this period was not rational in terms of transitivity. The Structural break Analysis using the Kruskal-Wallis (K-W) Statistic based on WARP showed the first evidence of a structural break in Autumn 2020, with the rising trend of the statistic from Spring 2021 confirming a structural change in preferences following the COVID-19 pandemic. Analysis of the K-W statistic based on SARP confirms the existence of a structural break starting from Winter 2018, despite a temporary return to stability in Autumn 2018. Furthermore, the results of the seasonal disaggregation indicate that in the Warm Seasons (Spring and Summer), no WARP violations were observed, but a structural break based on SARP occurred starting from Spring 2020. In the Cold Seasons (Autumn and Winter), only one WARP violation was recorded. However, the SARP analysis showed the first break in Autumn 2018, which subsequently led to intermittent instability in preferences rather than a permanent break.
Conclusion:
The current research delivers a clear policy message: Structural break in consumer preferences for animal products is not a mere statistical anomaly but reflects a decline in real purchasing power and a sharp rise in market uncertainty. The Kruskal-Wallis statistic confirms this Structural break and severe SARP violations are linked to economic shocks and reduced household buying power. Therefore, the primary policy recommendation is indirect intervention via stable monetary and foreign exchange policies, as short-term support measures are ineffective until exchange rate fluctuations and general inflation are controlled. Furthermore, due to the substitution effect observed during cold seasons and economic shocks (like the shift from red meat to cheaper chicken and eggs, destabilizing preferences), it's crucial to re-evaluate income support programs for lower-income deciles (such as electronic coupon) and to stabilize the supply chain of substitute goods to prevent further Structural break and a drop in overall animal protein consumption. Finally, policymakers should avoid interpreting Structural break as a change in consumer taste and, instead of relying on temporary measures (like the Preferential Exchange Rate in 2018), must accept preference instability as a new structural reality when formulating policies. These findings emphasize that price shocks immediately resulted in non-transitive changes and substitution in the consumption basket. Therefore, policymakers are advised to, in addition to strengthening macroeconomic stability, utilize tools such as electronic coupon to compensate for the substitution effects and prevent a further decline in animal protein consumption.