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

Schiraldi, Pasquale ORCID: 0000-0003-2469-1734 and Davis, Peter (2014) The flexible coefficient multinomial logit (FC-MNL) model of demand for differentiated products. RAND Journal of Economics, 45 (1). pp. 32-63. ISSN 0741-6261

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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.

Item Type:	Article
Official URL:	http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information:	© 2014 RAND
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory
Date Deposited:	28 Apr 2014 14:10
Last Modified:	21 Nov 2024 01:48
Projects:	LRG-39888
Funders:	British Academy
URI:	http://eprints.lse.ac.uk/id/eprint/46855

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