Improving the performance of random coefficients demand models: the role of optimal instruments
AbstractWe shed new light on the performance of Berry, Levinsohn and Pakes’ (1995) GMM estimator of the aggregate random coefficient logit model. Based on an extensive Monte Carlo study, we show that the use of Chamberlain’s (1987) optimal instruments overcomes most of the problems that have recently been documented with standard, non-optimal instruments. Optimal instruments reduce small sample bias, but prove even more powerful in increasing the estimator’s efficiency and stability. Other recent methodological advances (MPEC, polynomial-based integration of the market shares) greatly improve computational speed, but they are only successful in terms of bias and efficiency when combined with optimal instruments.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces12.07.
Date of creation: Jun 2012
Date of revision:
Other versions of this item:
- Reynaert, Mathias & Verboven, Frank, 2012. "Improving the Performance of Random Coefficients Demand Models: the Role of Optimal Instruments," CEPR Discussion Papers 9026, C.E.P.R. Discussion Papers.
- Reynaert, Mathias & Verboven, Frank, 2012. "Improving the performance of random coefficients demand models: the role of optimal instruments," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/350314, Katholieke Universiteit Leuven.
- Reynaert, M. & Verboven, F., 2012. "Improving the performance of random coefficients demand models: The role of optimal instruments," Working Papers 2012011, University of Antwerp, Faculty of Applied Economics.
- C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
- L00 - Industrial Organization - - General - - - General
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Crawford, Gregory S., 2012.
"Endogenous Product Choice : A Progress Report,"
The Warwick Economics Research Paper Series (TWERPS)
979, University of Warwick, Department of Economics.
- Heiss, Florian & Winschel, Viktor, 2008. "Likelihood approximation by numerical integration on sparse grids," Journal of Econometrics, Elsevier, vol. 144(1), pages 62-80, May.
- Jean-Pierre H. Dubé & Jeremy T. Fox & Che-Lin Su, 2009. "Improving the Numerical Performance of BLP Static and Dynamic Discrete Choice Random Coefficients Demand Estimation," NBER Working Papers 14991, National Bureau of Economic Research, Inc.
- Fox, Jeremy T. & Kim, Kyoo il & Ryan, Stephen P. & Bajari, Patrick, 2012.
"The random coefficients logit model is identified,"
Journal of Econometrics,
Elsevier, vol. 166(2), pages 204-212.
- Chamberlain, Gary, 1987. "Asymptotic efficiency in estimation with conditional moment restrictions," Journal of Econometrics, Elsevier, vol. 34(3), pages 305-334, March.
- Jiang, Renna & Manchanda, Puneet & Rossi, Peter E., 2009. "Bayesian analysis of random coefficient logit models using aggregate data," Journal of Econometrics, Elsevier, vol. 149(2), pages 136-148, April.
- Verboven, Frank, 1996.
"International price discrimination in the European car market,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/101467, Katholieke Universiteit Leuven.
- Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
- Michelle Sovinsky Goeree, 2005. "Advertising in the US Personal Computer Industry," Industrial Organization 0503002, EconWPA.
- Amemiya, Takeshi, 1977. "The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model," Econometrica, Econometric Society, vol. 45(4), pages 955-68, May.
- McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
- Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karla Vander Weyden).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.