The Inverse Product Differentiation Logit Model

Mogens Fosgerau, Julien Monardo and André de Palma ()

No 2022-22, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: We introduce the inverse product differentiation logit (IPDL) model, a micro-founded inverse market share model for differentiated products that captures market segmentation according to one or more characteristics. The IPDL model generalizes the nested logit model to allow richer substitution patterns, including complementarity in demand, and can be estimated by linear instrumental variables regression using market-level data. Furthermore, we provide Monte Carlo experiments that compare the IPDL model to the workhorse empirical models of the literature. Lastly, we show the empirical performance of the IPDL model using a well-known dataset on the ready-toeat cereals market.

Keywords: Demand estimation; Inverse demand; Logit; Consumer model; Differentiated products. (search for similar items in EconPapers)
JEL-codes: C26 D11 D12 L (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-com, nep-dcm, nep-ecm and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Inverse Product Differentiation Logit Model (2024)
Working Paper: The Inverse Product Differentiation Logit Model (2021)
Working Paper: The Inverse Product Differentiation Logit Model (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2022-22

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