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Robust firm pricing with panel data

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  • Handel, Benjamin R.
  • Misra, Kanishka
  • Roberts, James W.
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    Abstract

    Firms often have imperfect information about demand for their products. We develop an integrated econometric and theoretical framework to model firm demand assessment and subsequent pricing decisions with limited information. We introduce a panel data discrete choice model whose realistic assumptions about consumer behavior deliver partially identified preferences and thus generate ambiguity in the firm pricing problem. We use the minimax-regret criterion as a decision-making rule for firms facing this ambiguity. We illustrate the framework’s benefits relative to the most common discrete choice analysis approach through simulations and empirical examples with field data.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304407613000420
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Econometrics.

    Volume (Year): 174 (2013)
    Issue (Month): 2 ()
    Pages: 165-185

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    Handle: RePEc:eee:econom:v:174:y:2013:i:2:p:165-185

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    Web page: http://www.elsevier.com/locate/jeconom

    Related research

    Keywords: Firm pricing; Minimax-regret; Partial identification; Panel data;

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