Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach / C. Lanier Benkard, Patrick Bajari.

Format:

Book

Author/Creator:

Benkard, C. Lanier.

Contributor:

National Bureau of Economic Research.

Bajari, Patrick.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10278.

NBER working paper series no. w10278

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

We study the identification and estimation of Gorman-Lancaster style hedonic models of demand for differentiated products for the case when one product characteristic is not observed. Our identification and estimation strategy is a two-step approach in the spirit of Rosen (1974). Relative to Rosen's approach, we generalize the first stage estimation to allow for a single dimensional unobserved product characteristic, and also allow the hedonic pricing function to have a general, non-additive structure. In the second stage, if the product space is continuous and the functional form of utility is known then there exists an inversion between the consumer's choices and her preference parameters. This inversion can be used to recover the distribution of random coefficients nonparametrically. For the more common case when the set of products is finite, we use the revealed preference conditions from the hedonic model to develop a Gibbs sampling estimator for the distribution of random coefficients. We apply our methods to estimating personal computer demand.

Notes:

Print version record

February 2004.