Coverage of Retail Stores and Discrete Choice Models of Demand: Estimating Price Elasticities and Welfare Effects

Franco Mariuzzo, Patrick Walsh () and Ciara Whelan
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Franco Mariuzzo: The Geary Institute University College Dublin

No 200922, Working Papers from Geary Institute, University College Dublin

Abstract: Consumers’ choice set of products within stores can be limited. Ackerberg and Rysman (2005) address this problem by modeling unobserved consumer preferences over products and retail stores, leading to augmented demand specifications. Having Carbonated Soft Drink product level data, where we observe products’ store coverage, we are able to estimate their logit, nested logit and random coefficient logit specifications of demand in a structural model of equilibrium. Allowing for store coverage turns out to have a very significant impact on the estimated structural parameters and on the predictive power of the model. Taking these estimated structural parameters we perform a counterfactual whereby stores carry all products in the market. We find systematic increases in price elasticities and welfare in our new equilibrium. Competition in markets is more curtailed than normally assumed in structural models of industries.

Keywords: Carbonated Soft Drinks; differentiated products; discrete choice; store coverage; structural model; price elasticities; welfare (search for similar items in EconPapers)
JEL-codes: L11 L62 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2009-07-21
New Economics Papers: this item is included in nep-com, nep-dcm and nep-mkt
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Citations: View citations in EconPapers (1)

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http://www.ucd.ie/geary/static/publications/workingpapers/gearywp200922.pdf Second version, 2010 (application/pdf)

Related works:
Journal Article: Coverage of retail stores and discrete choice models of demand: Estimating price elasticities and welfare effects (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ucd:wpaper:200922

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