The General Nesting Logit (GNL) Model using Aggregate Data

André de Palma () and Julien Monardo ()
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Julien Monardo: ENS Cachan - École normale supérieure - Cachan, Université Paris-Saclay

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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.

Keywords: Demand estimation; Differentiated products; Discrete choice; Generalized entropy; Representative consumer; C26; D11; D12; L (search for similar items in EconPapers)
Date: 2017-07-27
New Economics Papers: this item is included in nep-dcm and nep-tre
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