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Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns

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  • Igal Hendel

Abstract

Buyers in many markets face multiple-discrete choices: they can purchase multiple-units as well as multiple-brands at the same time. This paper presents a multiple-discrete choice model for the analysis of differentiated products demand. Users maximize profits by choosing the number of units of each brand they purchase. I estimate the model using micro-level data on the demand for personal computers. I use the estimated demand structure to assess the welfare gains from computerization and technological innovation in peripherals. The estimated return on investment in personal computers is 92%. Moreover, a 10% increase in the performance-to-price ratio of microprocessors leads to a 2·2% gain in the estimated user surplus.

Suggested Citation

  • Igal Hendel, 1999. "Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 423-446.
  • Handle: RePEc:oup:restud:v:66:y:1999:i:2:p:423-446.
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00093
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