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Abstract

Consumers' choice set of products within stores can be limited. Ackerberg and Rysman (2005) address this problem by modeling unobserved consumer preferences over products and retail stores, leading to augmented demand specifications. Having Carbonated Soft Drink product level data, where we observe products' store coverage, we are able to estimate their logit, nested logit and random coefficient logit specifications of demand in a structural model of equilibrium. Allowing for store coverage turns out to have a very significant impact on the estimated structural parameters and on the predictive power of the model. Taking these estimated structural parameters we perform a counterfactual whereby stores carry all products in the market. We find systematic increases in price elasticities and welfare in our new equilibrium. Competition in markets is more curtailed than normally assumed in structural models of industries.

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File URL: http://www.sciencedirect.com/science/article/B6V8P-4YC2X8X-1/2/3f41250a26bfeee5a847df854ff9a85d
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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 28 (2010)
Issue (Month): 5 (September)
Pages: 555-578

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Handle: RePEc:eee:indorg:v:28:y:2010:i:5:p:555-578

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Web page: http://www.elsevier.com/locate/inca/505551

Related research

Keywords: Carbonated soft drinks Differentiated products Discrete choice Store coverage Structural model Price elasticities Welfare;

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Find related papers by JEL classification:

• L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
• L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment

References

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