A Hybrid Discrete Choice Model of Differentiated Product Demand with an Application to Personal Computers

44 Pages Posted: 12 Dec 2008 Last revised: 27 Aug 2010

See all articles by Minjae Song

Minjae Song

Bates White Economic Consulting

Date Written: July 31, 2010

Abstract

In this paper I consider a new discrete choice model of differentiated product demand that combines the pure characteristics demand model and the random coefficient logit demand model. In this hybrid model consumers are exposed to an idiosyncratic taste shock when they make a brand choice but free from it when they make a product choice within a brand. I compare the hybrid model with other demand models using product level data on personal computers. I also analyze the PC market after the merger between Hewlett-Packard and Compaq. My results show that the two brands became more differentiated from each other over time, suggesting that the merged firm repositioned its brands after the merger.

Keywords: Discrete choice models, product differentiation, personal computer market, post-merger analysis

Suggested Citation

Song, Minjae, A Hybrid Discrete Choice Model of Differentiated Product Demand with an Application to Personal Computers (July 31, 2010). Simon School Working Paper No. FR 08-09, Available at SSRN: https://ssrn.com/abstract=1315271 or http://dx.doi.org/10.2139/ssrn.1315271

Minjae Song (Contact Author)

Bates White Economic Consulting ( email )

1300 I Street NW
Washington, DC DC 20005
United States
2027471404 (Phone)

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