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Embedding Consumer Taste for Location into a Structural Model of Equilibrium

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Author Info

  • Franco Mariuzzo

    (Trinity College Dublin)

  • Patrick Paul Walsh

    (Trinity College Dublin)

  • Ciara Whelan

    (University College of Dublin)

Abstract

Given that brands (products) are location specific in terms of coverage of retail stores, we allow consumers to have preferences over location and products to carry distribution costs, alongside preferences and costs over other observable and unobservable product characteristics. We embed these considerations into Berry, Levinsohn and Pakes (1995) to jointly estimate demand and cost parameters for brands (products) in Retail Carbonated Soft Drinks. Allowing for location has a very significant impact on estimated primitives and the predictive power of the structural model. As a counterfactual exercise we show the effects on welfare of an equilibrium that results from a change in the distribution of consumer taste for location.

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File URL: http://www.ucd.ie/economics/research/papers/2005/WP05.03.pdf
File Function: First version, 2005
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200503.

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Length: 49 pages
Date of creation: 15 Feb 2005
Date of revision:
Handle: RePEc:ucn:wpaper:200503

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Phone: +353-1-7067777
Fax: +353-1-283 0068
Web page: http://www.ucd.ie/economics
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Keywords: Consumer taste for location distributions; differentiated products; discrete choice; aggregation; structural model and retail carbonated soft drinks.;

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References

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  1. Walsh, Patrick Paul & Whelan, Ciara, 1999. "Modelling Price Dispersion as an Outcome of Competition in the Irish Grocery Market," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 325-43, September.
  2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  3. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
  4. Jonathan Levin (Stanford University) & Pat Bajari & Lanier Benkard, 2004. "Estimating Dynamic Models of Imperfect Competition," Econometric Society 2004 North American Winter Meetings 627, Econometric Society.
  5. 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.
  6. 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.
  7. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May.
  8. Chamberlain, Gary, 1987. "Asymptotic efficiency in estimation with conditional moment restrictions," Journal of Econometrics, Elsevier, vol. 34(3), pages 305-334, March.
  9. 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.
  10. Nevo, Aviv, 1998. "Measuring Market Power in the Ready-To-Eat Cereal Industry," Research Reports 25164, University of Connecticut, Food Marketing Policy Center.
  11. Irmen, Andreas & Thisse, Jacques-François, 1996. "Competition in Multi-characteristics Spaces: Hotelling was Almost Right," CEPR Discussion Papers 1446, C.E.P.R. Discussion Papers.
  12. Walsh, Patrick P. & Whelan, Ciara, 2002. "Portfolio effects and firm size distribution : carbonated soft drinks," Open Access publications from University College Dublin urn:hdl:10197/130, University College Dublin.
  13. Levinsohn, James & Berry, Steven & Pakes, Ariel, 2004. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Scholarly Articles 3436404, Harvard University Department of Economics.
  14. 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.
  15. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  16. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
  17. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  18. 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.
  19. Patrick Paul Walsh & Ciara Whelan, 2001. "Product Differentiation and Firm Size Distribution - An Application to Carbonated Soft Drinks," Working Papers 200113, School Of Economics, University College Dublin.
  20. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  21. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November.
  22. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
  23. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
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Citations

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Cited by:
  1. Patrick Paul Walsh & Franco Mariuzzo & Ciara Whelan, 2005. "Merger Control in Differentiated Product," Trinity Economics Papers tep10, Trinity College Dublin, Department of Economics.
  2. Mariuzzo, Franco & Walsh, Patrick P. & Whelan, Ciara, 2006. "Merger control in differentiated product industries," Open Access publications from University College Dublin urn:hdl:10197/137, University College Dublin.
  3. repec:tcd:wpaper:tep10 is not listed on IDEAS
  4. Franco Mariuzzo & Patrick Paul Walsh & Ciara Whelan, 2004. "EU Merger Control in Differentiated Product Industries," CESifo Working Paper Series 1312, CESifo Group Munich.

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