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

Davis, Peter and Schiraldi, Pasquale (2013) The flexible coefficient multinomial logit (FC-MNL) model of demand for differentiated products. . The London School of Economics and Political Science, London, UK.

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Abstract

We show FC-MNL is flexible in the sense of Diewert (1974), 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 the use by estimating the demand for new automobiles in Italy.

Item Type: Monograph (Working Paper)
Additional Information: © 2013 The Authors
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Date Deposited: 11 Nov 2013 12:56
Last Modified: 08 Oct 2019 11:30
URI: http://eprints.lse.ac.uk/id/eprint/54252

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