Nested Logit or Random Coefficients Logit? A Comparison of Alternative Discrete Choice Models of Product Differentiation
Laura Grigolon () and
The Review of Economics and Statistics, 2014, vol. 96, issue 5, 916-935
We propose a random coefficients nested logit (RCNL) model to compare the tractable nested logit (NL) model with the more complex random coefficients logit (RC) model. After a simulation study, we use data on the European automobile market. Both the NL and RC models are rejected against the RCNL model. The RC model results in different substitution patterns and a wider market definition than the NL and RCNL models. Nevertheless, the predicted price effects from mergers are robust across models. Our findings stress the importance of accounting for discrete sources of market segmentation not captured by continuous product characteristics.
Keywords: nested logit model; random coefficients next logit model (search for similar items in EconPapers)
JEL-codes: C13 C31 L62 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (50) Track citations by RSS feed
Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00420 link to full text pdf (application/pdf)
Access to full text is restricted to subscribers.
Working Paper: Nested logit or random coefficients logit? A comparison of alternative discrete choice models of product differentiation (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:96:y:2014:i:5:p:916-935
Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535
Access Statistics for this article
The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu
More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by Ann Olson ().