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Author: Steven T. Berry Publisher: ISBN: Category : Economics Languages : en Pages : 0
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: Steven T. Berry Publisher: ISBN: Category : Economics Languages : en Pages : 0
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: 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: Steven T. Berry Publisher: ISBN: Category : 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: 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 Berry Publisher: ISBN: Category : 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 re view 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: Steven Berry Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
A recent literature considers the identification of heterogeneous demand and supply models via "quasi-experimental'' variation, as from instrumental variables. In this paper we establish nonparametric identification of differentiated products demand when one has "micro data'' linking characteristics of individual consumers to their choices. Micro data provide a panel structure allowing one to exploit variation across consumers within each market, where latent demand shocks are fixed. This facilitates richer demand specifications while substantially softening the reliance on instrumental variables, reducing both the number and types of instruments required. Our results require neither the structure of a "special regressor'' nor a "full support'' assumption on consumer-level observables.
Author: Giovanni Compiani Publisher: ISBN: Category : Languages : en Pages : 70
Book Description
I develop and apply a nonparametric approach to estimate demand in differentiated products markets. Estimating demand flexibly is key to addressing many questions in economics that hinge on the shape - and notably the curvature - of market demand functions. My approach applies to standard discrete choice settings, but accommodates a broader range of consumer behaviors and preferences, including complementarities across goods, consumer inattention, and consumer loss aversion. Further, no distributional assumptions are made on the unobservables and only limited functional form restrictions are imposed. Using California grocery store data, I apply my approach to perform two counterfactual exercises: quantifying the pass-through of a tax, and assessing how much the multi-product nature of sellers contributes to markups. In both cases, I find that estimating demand flexibly has a significant impact on the results relative to a standard random coefficients discrete choice model, and I highlight how the outcomes relate to the estimated shape of the demand functions.
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: Sergei Koulayev Publisher: ISBN: Category : Languages : en Pages : 23
Book Description
When consumers search for differentiated products, a given search decision can be explained either by low search cost or by low tastes for the set of products already found. We propose an identification strategy that allows to estimate the search cost distribution in the presence of unobserved tastes. The required data takes the form of conditional search decisions: observations of search actions combined with previously observed product displays. We develop an application using clickstream data from a hotel search platform. Estimates of price elasticity of demand in the search model differ from those in the static model, reflecting the bias due to endogeneity of search-generated choice sets.
Author: Steven T. Berry
Author: Steven T. Berry
Author: Steven T. Berry
Author: Steven T. Berry
Author: Aren Megerdichian
Author: Steven Berry
Author: Steven Berry
Author: Giovanni Compiani
Author: John Beath
Author: 
Author: Sergei Koulayev