The flexible coefficient multinomial logit (FC-MNL) model of demand for differentiated products

Pasquale Schiraldi () and Peter Davis

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We show FC-MNL is flexible in the sense of Diewert (), thus its parameters can be chosen to match a well-defined class of possible own- and cross-price elasticities of demand. In contrast to models such as Probit and Random Coefficient-MNL models, FC-MNL does not require estimation via simulation; it is fully analytic. Under well-defined and testable parameter restrictions, FC-MNL is shown to be an unexplored member of McFadden's class of Multivariate Extreme Value discrete-choice models. Therefore, FC-MNL is fully consistent with an underlying structural model of heterogeneous, utility-maximizing consumers. We provide a Monte-Carlo study to establish its properties and we illustrate its use by estimating the demand for new automobiles in Italy.

JEL-codes: J1 (search for similar items in EconPapers)
Date: 2014-03-17
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Citations: View citations in EconPapers (10)

Published in RAND Journal of Economics, 17, March, 2014, 45(1), pp. 32-63. ISSN: 0741-6261

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Related works:
Journal Article: The flexible coefficient multinomial logit (FC-MNL) model of demand for differentiated products (2014)
Working Paper: The flexible coefficient multinomial logit (FC-MNL) model of demand for differentiated products (2013)
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