EconPapers    
Economics at your fingertips  
 

Nested Logit or Random Coefficients Logit? A Comparison of Alternative Discrete Choice Models of Product Differentiation

Laura Grigolon () and Frank Verboven

The Review of Economics and Statistics, 2014, vol. 96, issue 5, 916-935

Abstract: 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)
Date: 2014
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.

Related works:
Working Paper: Nested logit or random coefficients logit? A comparison of alternative discrete choice models of product differentiation (2011) Downloads
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: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 ().

 
Page updated 2022-05-14
Handle: RePEc:tpr:restat:v:96:y:2014:i:5:p:916-935