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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 27, No. 2, pp.187-222
ISSN: 1225-0279 (Print)
Print publication date 30 May 2014
Received 10 Sep 2013 Revised 10 Dec 2013 Accepted 14 Dec 2013

A Pure Characteristics Demand Model for Automobile Variants

Øyvind Thomassen
Assistant Professor, Department of Economics, Seoul National University. Address: 599, Gwanakro, Silim 9-Dong, Gwanak-gu, Seoul 151-746, Tel: +82-2-880-6376 oyvind.thomassen@gmail.com

JEL Classification: C35, D12, L62

Abstract

This paper suggests a way to estimate a structural demand model for differentiated products using a single cross section of product-level data. Bajari and Benkard (2005) use revealed-preference bounds for the taste coefficients. In order to obtain point estimates, I modify their model in two ways. First, I impose additional bounds on the willingness to pay for characteristics, based on the price consumers actually paid for the product they purchased. Secondly, I make an assumption about the distribution of taste coefficients within the bounds for each product. I estimate the model with data on new car sales in Norway.

Keywords:

Discrete choice, Demand estimation, Differentiated products, Automobiles

Acknowledgments

Financial support from the Institute of Economic Research of Seoul National University is gratefully acknowledged.

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