A regression model of product differentiation

Mogens Fosgerau

MPRA Paper from University Library of Munich, Germany

Abstract: This note develops a model of product differentiation that can be estimated using standard regression techniques and applies it to a panel data set of new car sales. The model allows for complex substitution patterns according to an overlapping nest structure that makes cars closer substitutes if the share brand, body type, and/or quality level. A nest comprising all the car alternatives ensure that they are closer substitutes with each other than with the outside good. In addition, the model comprises fixed effects by car model, controlling for unobserved car quality.

Keywords: Market shares; complex substitution; endogeneity; discrete choice; new cars (search for similar items in EconPapers)
JEL-codes: C23 C25 C26 D12 L62 (search for similar items in EconPapers)
Date: 2016-07-01
New Economics Papers: this item is included in nep-com, nep-cse, nep-dcm, nep-ind, nep-mkt and nep-tre
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:72786

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