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Estimating a Continuous Hedonic-Choice Model with an Application to Demand for Soft Drinks

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  • Tat Y. Chan

    (Washington University, St. Louis)

Abstract

Using micro-level scanner data, I study empirically the consumer demand for soft drinks, which is characterized by multiple-product, multiple-unit purchasing behavior. I develop a continuous hedonic-choice model to investigate how consumers choose the best basket of products to satisfy various needs. My model's embedded-characteristics approach both helps to reduce the dimensionality problem in model estimation and generates flexible substitution patterns. Hence, the model is useful in application to data with many product choices that are correlated with each other at the individual level. The estimation results show that interesting substitutability and even a form of complementarity exist among soft drinks.

Suggested Citation

  • Tat Y. Chan, 2006. "Estimating a Continuous Hedonic-Choice Model with an Application to Demand for Soft Drinks," RAND Journal of Economics, The RAND Corporation, vol. 37(2), pages 466-482, Summer.
    • Handle: RePEc:rje:randje:v:37:y:2006:2:p:466-482
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    Citations

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    Cited by:

    1. Guofang Huang & Ahmed Khwaja & K. Sudhir, 2012. "Short Run Needs and Long Term Goals: A Dynamic Model of Thirst Management," Cowles Foundation Discussion Papers 1856, Cowles Foundation for Research in Economics, Yale University.
    2. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
    3. Volker Nocke & Nicolas Schutz, 2018. "Multiproduct‐Firm Oligopoly: An Aggregative Games Approach," Econometrica, Econometric Society, vol. 86(2), pages 523-557, March.
    4. Chan, Nathan W. & Kotchen, Matthew J., 2014. "A generalized impure public good and linear characteristics model of green consumption," Resource and Energy Economics, Elsevier, vol. 37(C), pages 1-16.
    5. Arthur Lewbel & Lars Nesheim, 2019. "Sparse demand systems: corners and complements," Boston College Working Papers in Economics 1005, Boston College Department of Economics.
    6. Horrace, William C. & Huang, Rui & Perloff, Jeffrey M., 2016. "Effects of increased variety on demand, pricing, and welfare," Research in Economics, Elsevier, vol. 70(4), pages 569-587.
    7. Horrace, William & Huang, Rui & Perloff, Jeffrey, 2009. "Variety: Consumer Choice and Optimal Diversity," Research Reports 149942, University of Connecticut, Food Marketing Policy Center.
    8. Gonzalez, Julia, 2018. "Soda consumption and brand loyalty," 2018 Annual Meeting, August 5-7, Washington, D.C. 273980, Agricultural and Applied Economics Association.
    9. Alessandro Iaria, & Wang, Ao, 2021. "An Empirical Model of Quantity Discounts with Large Choice Sets," The Warwick Economics Research Paper Series (TWERPS) 1378, University of Warwick, Department of Economics.
    10. Bhat, Chandra R., 2008. "The multiple discrete-continuous extreme value (MDCEV) model: Role of utility function parameters, identification considerations, and model extensions," Transportation Research Part B: Methodological, Elsevier, vol. 42(3), pages 274-303, March.

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