Arbeitspapier

Flexible estimation of random coefficient logit models of differentiated product demand

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.

ISBN
978-3-86304-398-8
Sprache
Englisch

Erschienen in
Series: DICE Discussion Paper ; No. 399

Klassifikation
Wirtschaft
Thema
Nachfragetheorie des Haushalts
Produktdifferenzierung
Mehrebenenanalyse
Logit-Modell
Theorie
Schätzung
Kraftfahrzeug
Absatz
USA

Ereignis
Geistige Schöpfung
(wer)
Kandelhardt, Johannes
Ereignis
Veröffentlichung
(wer)
Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
(wo)
Düsseldorf
(wann)
2023

Handle
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Kandelhardt, Johannes
  • Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Entstanden

  • 2023

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