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A generalised nested-logit model of the demand for automobile variants

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  • Øyvind THOMASSEN

Abstract

This paper estimates the demand for car model variants instead of looking only at demand for models in terms of the ’baseline’ variant of each model as done in the literature. The data has sex and age of the buyer for every car sold in Norway 2000-2004, in addition to characteristics of the cars. The demand model uses this information to estimate taste coefficients which depend on demographic characteristics. A nested logit model and a generalised nested logit model are used to induce correlation in the logit error between products with observable and unobservable similarities. Results indicate that it may be problematic to have different logit errors for every product when the number of products is very high, even when allowing for flexible correlation patterns.

Suggested Citation

  • Øyvind THOMASSEN, 2010. "A generalised nested-logit model of the demand for automobile variants," Working Papers Department of Economics ces10.17, KU Leuven, Faculty of Economics and Business, Department of Economics.
  • Handle: RePEc:ete:ceswps:ces10.17
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    Cited by:

    1. Sánchez Navarro, Dennis, 2013. "Análisis de elasticidades en el mercado automotor colombiano (2009 - 2011) mediante un modelo logit anidado
      [Analysis Of Elasticity In Colombian Automotive Market (2009 - 2011) Through A Nested Log
      ," MPRA Paper 46043, University Library of Munich, Germany.
    2. KITANO Taiju, 2016. "Measures to Promote Green Cars: Evaluation at the car variant level," Discussion papers 16075, Research Institute of Economy, Trade and Industry (RIETI).

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