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Author: Amit Gandhi Publisher: ISBN: Category : Econometrics Languages : en Pages :
Book Description
This is an invited chapter for the forthcoming Volume 4 of the Handbook of Industrial Organization. We present empirical models of demand and supply in differentiated products industries with an emphasis on the key ideas arising from the recent applied literature. We start with a discussion of the challenges in modeling and estimation of demand for differentiated products, and focus on discrete choice characteristics-based demand models that address these challenges while allowing enough flexibility to capture realistic substitution patterns. Our discussion emphasizes how empirical strategies can leverage different features of data depending on the sources of variation that are commonly found in applied work. Moving to the supply-side, we show how demand estimates combined with a pricing model, can be used to recover markups and marginal costs. We also show how the model of pricing can be tested. We discuss a baseline Bertrand-Nash model of competitive pricing, and expand it to cover a) coordinated pricing, b) wholesale relationships, and c) bargaining. We end the chapter with extensions of the demand model, including dynamic and continuous demand.
Author: Amit Gandhi Publisher: ISBN: Category : Econometrics Languages : en Pages :
Book Description
This is an invited chapter for the forthcoming Volume 4 of the Handbook of Industrial Organization. We present empirical models of demand and supply in differentiated products industries with an emphasis on the key ideas arising from the recent applied literature. We start with a discussion of the challenges in modeling and estimation of demand for differentiated products, and focus on discrete choice characteristics-based demand models that address these challenges while allowing enough flexibility to capture realistic substitution patterns. Our discussion emphasizes how empirical strategies can leverage different features of data depending on the sources of variation that are commonly found in applied work. Moving to the supply-side, we show how demand estimates combined with a pricing model, can be used to recover markups and marginal costs. We also show how the model of pricing can be tested. We discuss a baseline Bertrand-Nash model of competitive pricing, and expand it to cover a) coordinated pricing, b) wholesale relationships, and c) bargaining. We end the chapter with extensions of the demand model, including dynamic and continuous demand.
Author: Steven T. Berry Publisher: ISBN: Category : Consumer goods Languages : en Pages : 35
Book Description
Empirical models of demand for-and, often, supply of-differentiated products are widely used in practice, typically employing parametric functional forms and distributions of consumer heterogeneity. We review some recent work studying identification in a broad class of such models. This work shows that parametric functional forms and distributional assumptions are not essential for identification. Rather, identification relies primarily on the standard requirement that instruments be available for the endogenous variables-here, typically, prices and quantities. We discuss the kinds of instruments needed for identification and how the reliance on instruments can be reduced by nonparametric functional form restrictions or better data. We also discuss results on discrimination between alternative models of oligopoly competition.
Author: John Beath Publisher: Cambridge University Press ISBN: 9780521335522 Category : Business & Economics Languages : en Pages : 220
Book Description
There are few industries in modern market economies that do not manufacture differentiated products. This book provides a systematic explanation and analysis of the widespread prevalence of this important category of products. The authors concentrate on models in which product selection is endogenous. In the first four chapters they consider models that try to predict the level of product differentiation that would emerge in situations of market equilibrium. These market equilibria with differentiated products are characterised and then compared with social welfare optima. Particular attention is paid to the distinction between horizontal and vertical differentiation as well as to the related issues of product quality and durability. This book brings together the most important theoretical contributions to these topics in a succinct and coherent manner. One of its major strengths is the way in which it carefully sets out the basic intuition behind the formal results. It will be useful to advanced undergraduate and graduate students taking courses in industrial economics and microeconomic theory.
Author: Matthew Shum Publisher: World Scientific ISBN: 981310967X Category : Business & Economics Languages : en Pages : 154
Book Description
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.
Author: Publisher: Elsevier ISBN: 0323915140 Category : Business & Economics Languages : en Pages : 788
Book Description
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: Aren Megerdichian Publisher: ISBN: 9781124126838 Category : Breakfast cereals Languages : en Pages : 370
Book Description
This dissertation contains four essays at the intersection of econometrics and industrial organization. In all my chapters, I rely on a detailed set of supermarket scanner data on ready-to-eat cereals. In Chapter 1, I examine identification of price effects for differentiated product markets by relying on a conditional form of exogeneity that is an alternative framework to standard instrumental variables. I simulate price changes in the cereal industry arising from potential mergers between firms, one of which took place in 2008. In Chapter 2, I continue to employ conditional exogeneity to identify the effect of market price on demand for differentiated products. The analysis here departs from past studies of demand in several ways, including relaxing the prevalent assumption that observed product characteristics are exogenous. Estimates of implied price-cost margins based on the conditional exogeneity framework are far more reasonable and stable compared to estimates based on standard instrumental variables procedures. In Chapter 3, we (coauthored with Xun Lu) relax the omnipresent assumption that indirect utility takes a linear-separable parametric form in standard logit models of demand. We rely on conditional independence to structurally identify and nonparametrically estimate the average marginal effect of market price on consumer demand. We find that the effect of price on demand is monotonically increasing in price, resulting in high-priced goods having less elastic own price elasticities, and thus higher implied price-cost margins, which addresses a well-known concern in empirical industrial organization. In Chapter 4, I examine a firm's decision to raise price overtly (by increasing the dollar amount of a good) versus a hidden price change (by decreasing the contents in a good's package). I conduct a comprehensive set of empirical analyses in order to assess the impact of hidden price increases on expenditure share and profitability. During July 2007, General Mills decreased the cereal content for 20 out of 23 of their products in my sample of scanner data. A key finding is that consumers tend to notice hidden price changes on smaller-sized boxes of cereal, leading them to substitute to larger-sized boxes of cereal.
Author: Steven T. Berry Publisher: ISBN: Category : Economics Languages : en Pages : 54
Book Description
We consider nonparametric identification in models of differentiated products markets, using only market level observables. On the demand side we consider a non-parametric random utility model nesting random coefficients discrete choice models widely used in applied work. We allow for product/market-specific unobservables, endogenous product characteristics e.g., prices), and high-dimensional taste shocks with arbitrary correlation and heteroskedasticity. On the supply side we specify marginal costs nonparametrically, allow for unobserved firm heterogeneity, and nest a variety of equilibrium oligopoly models. We pursue two approaches to identification. One relies on instrumental variables conditions used previously to demonstrate identification in a nonparametric regression framework. With this approach we can show identification of the demand side without reference to a particular supply model. Adding the supply side allows identification of firms' marginal costs as well. Our second approach, more closely linked to classical identification arguments for supply and demand models, employs a change of variables approach. This leads to constructive identification results relying on exclusion and support conditions. Our results lead to a testable restriction that provides the first general formalization of Bresnahan's (1982) intuition for empirically discriminating between alternative models of oligopoly competition.
Author: Deep Mukherjee Publisher: Springer Nature ISBN: 9819949025 Category : Business & Economics Languages : en Pages : 625
Book Description
This book is a collection of 20 chapters on chosen topics from cross-section and panel data econometrics. It explores both theoretical and practical aspects of selected cutting-edge techniques which are gaining popularity among applied econometricians, while following the motto of “keeping things simple”. Each chapter gives a basic introduction to one such method, directs readers to supplementary references, and shows an application. The book takes into account that—A: The field of econometrics is evolving very fast and leading textbooks are trying to cover some of the recent developments in revised editions. This book offers basic introduction to state-of-the-art techniques and recent advances in econometric models with detailed applications from various developing and developed countries. B: An applied researcher or practitioner may prefer reference books with a simple introduction to an advanced econometric method or model with no theorems but with a longer discussion on empirical application. Thus, an applied econometrics textbook covering these cutting-edge methods is highly warranted; a void this book attempts to fills.The book does not aim at providing a comprehensive coverage of econometric methods. The 20 chapters in this book represent only a sample of the important topics in modern econometrics, with special focus on econometrics of cross-section and panel data, while also recognizing that it is not possible to accommodate all types of models and methods even in these two categories. The book is unique as authors have also provided the theoretical background (if any) and brief literature review behind the empirical applications. It is a must-have resource for students and practitioners of modern econometrics.
Author: Christopher R. Knittel Publisher: ISBN: Category : Demand functions (Economic theory) Languages : en Pages : 68
Book Description
"Empirical exercises in economics frequently involve estimation of highly nonlinear models. The criterion function may not be globally concave or convex and exhibit many local extrema. Choosing among these local extrema is non-trivial for a variety of reasons. In this paper, we analyze the sensitivity of parameter estimates, and most importantly of economic variables of interest, to both starting values and the type of non-linear optimization algorithm employed. We focus on a class of demand models for differentiated products that have been used extensively in industrial organization, and more recently in public and labor. We find that convergence may occur at a number of local extrema, at saddles and in regions of the objective function where the first-order conditions are not satisfied. We find own- and cross-price elasticities that differ by a factor of over 100 depending on the set of candidate parameter estimates. In an attempt to evaluate the welfare effects of a change in an industry's structure, we undertake a hypothetical merger exercise. Our calculations indicate consumer welfare effects can vary between positive values to negative seventy billion dollars depending on the set of parameter estimates used"--National Bureau of Economic Research web site
Author: Amit Gandhi
Author: Amit Gandhi
Author: Steven T. Berry
Author: John Beath
Author: Matthew Shum
Author: 
Author: Daniel Gros
Author: Aren Megerdichian
Author: Steven T. Berry
Author: Deep Mukherjee
Author: Christopher R. Knittel