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The General Nesting Logit (GNL) Model using Aggregate Data

Author

Listed:
  • André de Palma

    (ENS Cachan - École normale supérieure - Cachan, Université Paris-Saclay)

  • Julien Monardo

    (ENS Cachan - École normale supérieure - Cachan, Université Paris-Saclay)

Abstract

We study the general nesting logit (GNL) model for differentiated products proposed by Fosgerau and de Palma (2016) as a member of the family of generalized entropies built by Fosgerau, Melo, de Palma and Shum (2017), to estimate demand when using aggregate data. We show that the GNL model allows products to be independent, substitutable, or complementary. While Fosgerau and de Palma (2016) show that it can be transformed into a linear regression, we show that this linear regression is very similar to that of Berry (1994) for the nested logit in that it is just a regression of market shares on product characteristics and terms related to its nesting structure. We then use the Dominick's database for estimating the demand for cereals in Chicago in 1991-1992.

Suggested Citation

  • André de Palma & Julien Monardo, 2017. "The General Nesting Logit (GNL) Model using Aggregate Data," Working Papers hal-01552455, HAL.
    • Handle: RePEc:hal:wpaper:hal-01552455
    Note: View the original document on HAL open archive server: https://hal.science/hal-01552455v2
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    References listed on IDEAS

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    More about this item

    Keywords

    Demand estimation; Differentiated products; Discrete choice; Generalized entropy; Representative consumer; C26; D11; D12; L;
    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

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