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

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Title: Coverage of retail stores and discrete choice models of demand : estimating price elasticities and welfare effects
Authors: Mariuzzo, Franco
Walsh, Patrick P.
Whelan, Ciara
Permanent link: http://hdl.handle.net/10197/2676
Date: Jan-2010
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.
Funding Details: Not applicable
Type of material: Working Paper
Publisher: University College Dublin. Geary Institute
Keywords: Carbonated soft drinks;Differentiated products;Discrete choice;Store coverage;Structural model;Price elasticities
Subject LCSH: Product differentiation
Soft drinks
Consumers' preferences
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Geary Institute Working Papers

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