[PDF] Inverse Product Differentiation Logit Model eBook

Author : Jinghai Huo
Publisher :
Page : 0 pages
File Size : 23,51 MB
Release : 2023
Category :
ISBN :

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Since the seminal work by Berry-Levinsohn-Pakes (BLP), random coefficient logit (RCL) has become the workhorse model to estimate demand elasticities in markets with differentiated products using aggregated sales data. While the ability to represent flexible substitution patterns makes RCL a preferable model, its estimation is computationally challenging due to the numerical inversion of the demand function. Recently proposed inverse product differentiation logit (IPDL) claims to address these computational challenges by directly specifying the inverse demand function and representing flexible substitution patterns through non-hierarchical product segmentation in multiple dimensions. Unlike the two-stage simulation-based estimation of RCL, IPDL requires estimating a traditional linear instrumental variable regression model. In theory, IPDL appears to be an attractive alternative to RCL, but its potential has not yet been explored in empirical studies. We present the first application of IPDL in understanding the demand for passenger cars in China using province-level sales data. Our results indicate that demand elasticity estimates of IPDL and RCL are not statistically different, i.e., IPDL could capture substitution patterns similar to RCL. The estimation of IPDL takes less than a second on a regular computer (i.e., over 500 times faster than RCL). Overall, the flexibility and computational efficiency of IPDL could make it a workhorse model for demand estimation using market-level aggregated sales data.

Author : Simon P. Anderson
Publisher : MIT Press
Page : 454 pages
File Size : 30,59 MB
Release : 1992
Category : Business & Economics
ISBN : 9780262011280

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"The discrete choice approach provides an ideal framework for describing the demands for differentiated products and can be used for studying most product differentiation models in the literature. By introducing extra dimensions of product heterogeneity, the framework also provides richer models of firm location and product selection."--BOOK JACKET.

Author : Johannes Kandelhardt
Publisher :
Page : 0 pages
File Size : 19,25 MB
Release : 2023
Category :
ISBN : 9783863043988

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The Berry, Levinsohn, and Pakes (1995, BLP) model is widely used to obtain parameter estimates of market forces in differentiated product markets. The results are often used as an input to evaluate economic activity in a structural model of demand and supply. Precise estimation of parameter estimates is therefore crucial to obtain realistic economic predictions. The present paper combines the BLP model and the logit mixed logit model of Train (2016) to estimate the distribution of consumer heterogeneity in a flexible and parsimonious way. A Monte Carlo study yields asymptotically normally distributed and consistent estimates of the structural parameters. With access to micro data, the approach allows for the estimation of highly flexible parametric distributions. The estimator further allows to introduce correlations between tastes, yielding more realistic demand patterns without substantially altering the procedure of estimation, making it relevant for practitioners. The BLP estimator is established to yield biased and inconsistent results when the underlying distributional shape is non-normally distributed. An application shows the estimator to perform well on a real world dataset and provides similar estimates as the BLP estimator with the option of specifying consumer heterogeneity as a function of a polynomial, step function or spline, resulting in a flexible estimation procedure.

Author :
Publisher : Elsevier
Page : 788 pages
File Size : 46,90 MB
Release : 2021-12-09
Category : Business & Economics
ISBN : 0323915140

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Handbook of Industrial Organization, Volume Four highlights new advances in the field, with this new volume presenting interesting chapters written by an international board of expert authors. Presents authoritative surveys and reviews of advances in theory and econometrics Reviews recent research on capital raising methods and institutions Includes discussions on developing countries

Author : Guillermo Gallego
Publisher :
Page : 26 pages
File Size : 35,6 MB
Release : 2014
Category :
ISBN :

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We study firms that sell multiple substitutable products and customers whose purchase behavior follows a Nested Logit model, of which the Multinomial Logit model is a special case. Customers make purchasing decision sequentially under the Nested Logit model: they first select a nest of products and subsequently purchase one within the selected nest. We consider the multi-product pricing problem under the general Nested Logit model with product-differentiated price sensitivities and arbitrary nest coefficients. We show that the adjusted markup, defined as price minus cost minus the reciprocal of price sensitivity, is constant for all products within a nest at optimality. This reduces the problem's dimension to a single variable per nest. We also show that the adjusted nest-level markup is nest-invariant for all the nests, which further reduces the problem to maximizing a single-variable unimodal function under mild conditions. We also use this result to simplify the oligopolistic multi-product price competition and characterize the Nash equilibrium. We also consider more general attraction functions that include the linear utility and the multiplicative competitive interaction models as special cases, and show that similar techniques can be used to significantly simplify the corresponding pricing problems.

Author : Roosen, Jutta
Publisher : Edward Elgar Publishing
Page : 384 pages
File Size : 31,86 MB
Release : 2022-03-17
Category : Social Science
ISBN : 1800372051

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This Modern Guide provides detailed theoretical and empirical insights into key areas of research in food economics. It takes a forward-looking perspective on how different actors in the food system shape the sustainability of food production, distribution, and consumption, as well as on major challenges to efficient and inclusive food systems.

Author : Kenneth Train
Publisher : Cambridge University Press
Page : 399 pages
File Size : 38,37 MB
Release : 2009-07-06
Category : Business & Economics
ISBN : 0521766559

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This book describes the new generation of discrete choice methods, focusing on the many advances that are made possible by simulation. Researchers use these statistical methods to examine the choices that consumers, households, firms, and other agents make. Each of the major models is covered: logit, generalized extreme value, or GEV (including nested and cross-nested logits), probit, and mixed logit, plus a variety of specifications that build on these basics. Simulation-assisted estimation procedures are investigated and compared, including maximum stimulated likelihood, method of simulated moments, and method of simulated scores. Procedures for drawing from densities are described, including variance reduction techniques such as anithetics and Halton draws. Recent advances in Bayesian procedures are explored, including the use of the Metropolis-Hastings algorithm and its variant Gibbs sampling. The second edition adds chapters on endogeneity and expectation-maximization (EM) algorithms. No other book incorporates all these fields, which have arisen in the past 25 years. The procedures are applicable in many fields, including energy, transportation, environmental studies, health, labor, and marketing.

Author : Matthew Shum
Publisher : World Scientific
Page : 154 pages
File Size : 38,25 MB
Release : 2016-12-14
Category : Business & Economics
ISBN : 981310967X

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Economic Models for Industrial Organization focuses on the specification and estimation of econometric models for research in industrial organization. In recent decades, empirical work in industrial organization has moved towards dynamic and equilibrium models, involving econometric methods which have features distinct from those used in other areas of applied economics. These lecture notes, aimed for a first or second-year PhD course, motivate and explain these econometric methods, starting from simple models and building to models with the complexity observed in typical research papers. The covered topics include discrete-choice demand analysis, models of dynamic behavior and dynamic games, multiple equilibria in entry games and partial identification, and auction models.