Moon, HR;
Shum, M;
Weidner, M;
(2018)
Estimation of random coefficients logit demand models with interactive fixed effects.
Journal of Econometrics
, 206
(2)
pp. 613-644.
10.1016/j.jeconom.2018.06.016.
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Abstract
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 illustration to US automobile demand.
| Type: | Article |
|---|---|
| Title: | Estimation of random coefficients logit demand models with interactive fixed effects |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.jeconom.2018.06.016 |
| Publisher version: | https://doi.org/10.1016/j.jeconom.2018.06.016 |
| Language: | English |
| Additional information: | Copyright © 2018 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/). |
| Keywords: | Discrete-choice demand model, interactive fixed effects, factor analysis, panel data, random utility model. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/1542300 |
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