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The Efect of Differences in Buyer and Non-Buyer Characteristics on Equilibrium Price-Elasticities: an Empirical Study on the Italian Automobile Market

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  • Franco Mariuzzo

    (Department of Economics, Trinity College)

Abstract

This paper provides an empirical analysis of own- and cross-price elasticities of substitution for the 1989-2000 Italian automobile industry. We use product-level data consistent with a structural model of equilibrium in a differentiated products oligopolistic industry and follow a random coefficient model to get reliable price elasticities of substitution. We enrich our data with a special section having information on individuals buying and non-buying vehicles. Tracking the di?erent characteristics of individuals buying and non-buying ends to be determinant for more precise estimations. Our data show that models that disregard this refined information tend to consistently overestimate price elasticities.

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Bibliographic Info

Paper provided by Trinity College Dublin, Department of Economics in its series Trinity Economics Papers with number tep13.

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Date of creation: Aug 2005
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Handle: RePEc:tcd:tcduee:tep13

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Postal: Trinity College, Dublin 2
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  1. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
  2. Aviv Nevo, 2003. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Microeconomics 0303006, EconWPA.
  3. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
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  5. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
  6. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May.
  7. Steven Berry & James Levinsohn & Ariel Pakes, 2001. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Cowles Foundation Discussion Papers 1337, Cowles Foundation for Research in Economics, Yale University.
  8. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
  9. Franco Mariuzzo & Patrick Paul Walsh & Ciara Whelan, 2003. "Firm Size and Market Power in Carbonated Soft Drinks," Review of Industrial Organization, Springer, vol. 23(3_4), pages 283-299, December.
  10. Jerry HAUSMAN & Gregory LEONARD & J. Douglas ZONA, 1994. "Competitive Analysis with Differentiated Products," Annales d'Economie et de Statistique, ENSAE, issue 34, pages 159-180.
  11. Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random-Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
  12. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
  13. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  14. Berkovec, James & Rust, John, 1985. "A nested logit model of automobile holdings for one vehicle households," Transportation Research Part B: Methodological, Elsevier, vol. 19(4), pages 275-285, August.
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