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Estimation of Unobserved Attributes Using a Control Function Approach, Modeling the Demand for Mint Flavored Gum

Daniel Toro-Gonzalez, Jia Yan, R. Karina Gallardo () and Jill McCluskey
Authors registered in the RePEc Author Service: Daniel Toro González ()

No 2013-06, Working Papers from School of Economic Sciences, Washington State University

Abstract: We analyze consumers’ demand for mint gum accounting for product heterogeneity and unobservable, to the econometrician, flavor quality. We use the control function (CF) approach in the context of a discrete choice logit model in an oligopolistic framework, where price-setting firms endogenously determine prices. We found that when using the control function approach, demand estimators are improved by reducing potential biases generated by endogeneity. We found that gum is price inelastic with respect to price and quality. Implications for the mint oil industry in the Pacific Northwest are cited.

Keywords: Control Function Approach; Quality Differentiation; Unobserved Product Attributes; Demand Estimation; Gum (search for similar items in EconPapers)
JEL-codes: L11 L13 L66 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2013-04
New Economics Papers: this item is included in nep-com and nep-dcm
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