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A Gibbs sampler for mixed logit analysis of differentiated product markets using aggregate data


  • Charles Romeo



In this paper, we offer the Gibbs sampler as an alternative to the GMM estimator developed by Berry, Levinsohn, and Pakes (Econometrica 63(4), 841–890, 1995) in their equilibrium differentiated product market analysis of the automobile industry. We use the GMM objective as the basis for forming a posterior distribution, thereby making use of certain attributes of the GMM approach that reduce the computational cost of conducting posterior inference. The advantages provided by the our Bayesian GMM approach are that it enables us to conduct inference under the exact posterior distribution for the parameters, to estimate moments of functions of interest that are not readily available using GMM, and to capture non-normalities in the parameter distributions. The cost of posterior inference takes the form of additional distributional assumptions and longer computational time. In an illustration within, we find the random coefficients to be only weakly identified by the data. This results in highly non-normal distributions. The GMM estimates hint at this problem, but it can only be fully characterized by the Gibbs sampler. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Charles Romeo, 2007. "A Gibbs sampler for mixed logit analysis of differentiated product markets using aggregate data," Computational Economics, Springer;Society for Computational Economics, vol. 29(1), pages 33-68, February.
  • Handle: RePEc:kap:compec:v:29:y:2007:i:1:p:33-68 DOI: 10.1007/s10614-006-9074-y

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    References listed on IDEAS

    1. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
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    Cited by:

    1. 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.

    More about this item


    Gibbs sampler; Mixed logit; Differentiated product markets; L1; C11; C15; C33;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models


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