Economics
Identification and Estimation of Market Size in Discrete Choice Demand Models
25 January 2024 | 8:00 p.m. - 9:30 p.m.
Online
Speaker:
Ms. Linqi Zhang
Ph.D. candidate in Economics
Boston College
Abstract:
Within the framework of Berry (1994) and Berry, Levinsohn, and Pakes (1995), I
prove that market size can be point identi ed along with all demand parameters in
a random coecients logit (BLP) model. I require no additional data beyond what
is needed to estimate standard BLP models. Identi cation comes from the exogenous
variation in product characteristics across markets and the nonlinearity of the demand
system. I apply the method to a merger simulation in the carbonated soft drinks
market in the US, and nd that assuming a market size larger than the true estimated
size would underestimate merger price increases by 31% on average.
