Arbeitspapier

Estimation of random coefficients logit demand models with interactive fixed effects

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We extend the Berry, Levinsohn and Pakes (BLP, 1995) random coefficients discrete choice demand model, which underlies much recent empirical work in IO. We add interactive fixed effects in the form of a factor structure on the unobserved product characteristics. The interactive fixed effects can be arbitrarily correlated with the observed product characteristics (including price), which accommodates endogeneity and, at the same time, captures strong persistence in market shares across products and markets. We propose a two step least squares-minimum distance (LS-MD) procedure to calculate the estimator. Our estimator is easy to compute, and Monte Carlo simulations show that it performs well. We consider an empirical application to US automobile demand.

Language: Englisch

Bibliographic citation: Series: cemmap working paper ; No. CWP20/14

Classification: Wirtschaft
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
Single Equation Models; Single Variables: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

Subject: discrete-choice demand model
interactive fixed effects
factor analysis
panel data
random utility model

Event: Geistige Schöpfung

(who): Moon, Hyungsik Roger
Shum, Matthew
Weidner, Martin

Event: Veröffentlichung

(who): Centre for Microdata Methods and Practice (cemmap)

(where): London

(when): 2014

DOI: doi:10.1920/wp.cem.2014.2014

Handle: http://hdl.handle.net/10419/97374

Last update: 10.03.2025, 11:42 AM CET

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Object type

Arbeitspapier

Associated

Moon, Hyungsik Roger
Shum, Matthew
Weidner, Martin
Centre for Microdata Methods and Practice (cemmap)

Time of origin

2014

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