Bayesian Analysis of Simultaneous Demand and Supply

Sha Yang (), Yuxin Chen and Greg Allenby ()

Quantitative Marketing and Economics (QME), 2003, vol. 1, issue 3, 275 pages

Abstract: In models of demand and supply, consumer price sensitivity affects both the sales of a good through price, and the price that is set by producers and retailers. The relationship between the dependent variables (e.g., demand and price) and the common parameters (e.g., price sensitivity) is typically non-linear, especially when heterogeneity is present. In this paper, we develop a Bayesian method to address the computational challenge of estimating simultaneous demand and supply models that can be applied to both the analysis of household panel data and aggregated demand data. The method is developed within the context of a heterogeneous discrete choice model coupled with pricing equations derived from either specific competitive structures, or linear equations of the kind used in instrumental variable estimation, and applied to a scanner panel dataset of light beer purchases. Our analysis indicates that incorporating heterogeneity into the demand model all but eliminates the bias in the price parameter due to the endogeneity of price. The analysis also supports the use of a full information analysis. Copyright Kluwer Academic Publishers 2003

Keywords: discrete choice model; endogeneity; heterogeneity; hierarchical Bayesian analysis (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

Downloads: (external link)
http://hdl.handle.net/10.1023/B:QMEC.0000003327.55605.26 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:qmktec:v:1:y:2003:i:3:p:251-275

Ordering information: This journal article can be ordered from
http://www.springer. ... ng/journal/11129/PS2

DOI: 10.1023/B:QMEC.0000003327.55605.26

Access Statistics for this article

Quantitative Marketing and Economics (QME) is currently edited by Pradeep Chintagunta

More articles in Quantitative Marketing and Economics (QME) from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().