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UID:d8b0061e321bbdc8471b56f6f6b25af7
CATEGORIES:Seminars
CREATED:20161216T180249
SUMMARY:Rachel Griffith - Institute for Fiscal Studies
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:<p style="text-align: justify;"><strong>Estimating Demand Parameters with C
 hoice Set Misspecification</strong></p><p style="text-align: justify;">Abst
 ract:</p><p style="text-align: justify;">We describe methods to estimate de
 mand parameters in the presence of choice set misspecification due to unobs
 erved individual choice sets. We show that a consumer’s probability of maki
 ng a choice from her true choice set can be written as the probability she 
 makes the same choice from a universal choice set less a bias term capturin
 g the probability that she would choose any of the elements in her true cho
 ice set. This bias term is ignored in the vast majority of applications of 
 differentiated product demand estimation, which estimate preferences based 
 on a universal choice set. We show how to estimate models that account for 
 this bias under Logit demand using both (1) a variation of the Fixed Effect
  Logit approach due to Chamberlain (1980) and (2) observed individual-speci
 fic purchase histories. We illustrate these ideas using household-level sca
 nner data exploiting variation in choice sets based on heterogeneous produc
 t offerings across stores and the introduction of a new product variety in 
 the market for ketchup in the UK. Our results show that accounting for choi
 ce set misspecification is critical for accurately estimating own- and cros
 s-price elasticities of demand.</p>
DTSTAMP:20260407T001725Z
DTSTART:20151105T173000Z
DTEND:20151105T190000Z
SEQUENCE:0
TRANSP:OPAQUE
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