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Demand Models for Differentiated Goods with Complementarity and Substitutability

Author

Listed:
  • Mogens Fosgerau

    (Department of Economics, University of Copenhagen)

  • André de Palma

    (CREST, ENS Paris-Saclay, University Paris-Saclay)

  • Julien Monardo

    (CREST, ENS Paris-Saclay, University Paris-Saclay)

Abstract

We develop a class of demand models for differentiated products. The new models facilitate the BLP method (Berry et al., 1995) while numerical inversion of the demand system is not required. They can accommodate rich patterns of substitution and complementarity while being easily estimated with standard regression techniques and allowing very large choice sets. We use the new models to describe markets for differentiated products that exhibit segmentation according to several dimensions and illustrate their application by estimating demand for cereals in Chicago.

Suggested Citation

  • Mogens Fosgerau & André de Palma & Julien Monardo, 2018. "Demand Models for Differentiated Goods with Complementarity and Substitutability," Discussion Papers 18-02, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:1802
    as

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    File URL: https://www.economics.ku.dk/research/publications/wp/dp_2018/papers/1802.pdf
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    References listed on IDEAS

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    Cited by:

    1. Roy Allen, 2019. "Injectivity and the Law of Demand," Papers 1908.05714, arXiv.org.
    2. Roy Allen & John Rehbeck, 2020. "Hicksian complementarity and perturbed utility models," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 245-261, October.

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    More about this item

    Keywords

    Demand estimation; Differentiated products; Discrete choice; Generalized entropy; Representative consumer;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L - Industrial Organization

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