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Coverage of retail stores and discrete choice models of demand : estimating price elasticities and welfare effects

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Author(s)
Mariuzzo, Franco 
Walsh, Patrick P. 
Whelan, Ciara 
Uri
http://hdl.handle.net/10197/2676
Date Issued
January 2010
Date Available
05T15:12:49Z January 2011
Abstract
Consumers' choice set of products within stores can be limited. Ackerberg and Rysman (2005) address this problem by modeling unobserved consumer preferences over products and retail stores, leading to augmented demand specifications. Having Carbonated Soft Drink product level data, where we observe products' store coverage, we are able to estimate their logit, nested logit and random coefficient logit specifications of demand in a structural model of equilibrium. Allowing for store coverage turns out to have a very significant impact on the estimated structural parameters and on the predictive power of the model. Taking these estimated structural parameters we perform a counterfactual whereby stores carry all products in the market. We find systematic increases in price elasticities and welfare in our new equilibrium. Competition in markets is more curtailed than normally assumed in structural models of industries.
Sponsorship
Not applicable
Type of Material
Working Paper
Publisher
University College Dublin. Geary Institute
Series
UCD Geary Institute Discussion Paper Series
WP 09 22
Keywords
  • Carbonated soft drink...

  • Differentiated produc...

  • Discrete choice

  • Store coverage

  • Structural model

  • Price elasticities

Classification
L11
L62
Subject – LCSH
Product differentiation
Soft drinks
Consumers' preferences
Web versions
http://ideas.repec.org/p/ucd/wpaper/200922.html
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
https://creativecommons.org/licenses/by-nc-sa/1.0/
Owning collection
Geary Institute Working Papers
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