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Embedding consumer taste for location into a structural model of equilibrium

Author Info

  • Ciara Whelan
  • Franco Mariuzzo
  • Patrick P. Walsh

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://hdl.handle.net/10197/140
File Function: First version, 2005
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Paper provided by School of Economics, University College Dublin in its series Working Papers with number 200503.

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Date of creation: Jan 2005
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Handle: RePEc:ucn:wpaper:200503
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Keywords: Consumer taste for location distributions; Differentiated products; Discrete choice; Aggregation; Structural model; Retail carbonated soft drinks; Consumers' preferences; Product differentiation; Soft drinks;

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Find related papers by JEL classification:
  • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
  • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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  1. Ciara Whelan & Patrick P. Walsh, 2002. "Portfolio effects and firm size distribution : carbonated soft drinks," Open Access publications 10197/130, School of Economics, University College Dublin.
  2. Patrick P. 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.
  3. Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, vol. 69(2), pages 307-42, March.
  4. Daniel McFadden, 1987. "A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Working papers 464, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. 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.
  6. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers 255, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "On Hotelling's "Stability in competition"," CORE Discussion Papers RP 385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  9. Steven Berry & James Levinsohn & Ariel Pakes, 2004. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 68-105, February.
  10. 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.
  11. 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.
  12. Chamberlain, Gary, 1987. "Asymptotic efficiency in estimation with conditional moment restrictions," Journal of Econometrics, Elsevier, vol. 34(3), pages 305-334, March.
  13. IRMEN, Andreas & THISSE, Jacques-Francois, 1997. "Competition in multi-characteristics spaces: hotelling was almost right," CORE Discussion Papers 1997053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. 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.
  15. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
  16. Jerry Hausman & Gregory Leonard & J. Douglas Zona, 1994. "Competitive Analysis with Differentiated Products," Annals of Economics and Statistics, GENES, issue 34, pages 143-157.
  17. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September.
  18. Franco Mariuzzo & Patrick Walsh & Ciara Whelan, 2003. "Firm Size and Market Power in Carbonated Soft Drinks," Review of Industrial Organization, Springer, vol. 23(3), pages 283-299, December.
  19. repec:adr:anecst:y:1994:i:34 is not listed on IDEAS
  20. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  21. repec:adr:anecst:y:1994:i:34:p:06 is not listed on IDEAS
  22. 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.
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Cited by:

  1. Franco Mariuzzo & Patrick P. Walsh & Ciara Whelan, 2005. "Merger control in differentiated product industries," Working Papers 200508, School of Economics, University College Dublin.
  2. Ciara Whelan & Patrick P. Walsh & Franco Mariuzzo, 2004. "EU merger control in differentiated product industries," Open Access publications 10197/138, School of Economics, University College Dublin.
  3. Patrick Paul Walsh & Franco Mariuzzo & Ciara Whelan, 2005. "Merger Control in Differentiated Product," Trinity Economics Papers 2000510, Trinity College Dublin, Department of Economics.
  4. repec:tcd:wpaper:tep10 is not listed on IDEAS

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