The effect of instability of bread price on household food security and mental health using agent-based simulation approach

Inflation and instability in food prices have affected low-income groups more than others and have resulted in the elimination of essential food groups in this type of households. Considering the changes in household’s behavior in the case of rising bread prices can help policymakers in the pricing of this product.

In this study, the price elasticity of bread is estimated by the Almost Ideal Demand System (AIDS). Then, using the results obtained, the change in household behavior in the case of rising bread prices is simulated with an agent-based simulation approach. Demand elasticity calculations are based on household survey data for 2016 and 2018 (for more than 18,000 households) and the impact of increasing bread prices on 5000 agents (households) in the Net Logo software is simulated.

The increase in the bread price has led to a 33% increase in the lowest quintile expenditures, which confirms that this product is a Giffen good for this group. Following the increase in the bread price, the burden of bread inflation on the budget in the first income quintile is more than 5 times of that of the fifth.

Following the increase in the bread price, the increased share of bread in the basket of low-income groups, indicates the substitution of this good for other essential food items. This point, in addition to the impacts of malnutrition and their consequences, bring the policymakers attention to critical point of not to manipulate the price of bread.