Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market

43 Pages Posted: 8 Aug 2000 Last revised: 9 Oct 2010

See all articles by Steven Berry

Steven Berry

Yale University - Department of Economics; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

James A. Levinsohn

University of Michigan; National Bureau of Economic Research (NBER)

Ariel Pakes

National Bureau of Economic Research (NBER); Harvard University - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: March 1998

Abstract

In this paper, we exploit new sources of cross-sectional data to estimate a detailed product-level demand system for new passenger vehicles. We use four data sources: on the characteristics of products, on the attributes of the U.S. population of households, on the match between the first and second vehicle choices of the household, and on the match between households attributes and first choice vehicles. We show that these data solve some, but not all, of the traditional problems in estimating differentiated products demand systems and indicate which data sources are important for which problem. The data is rich enough to reveal a rather complex substitution pattern, requiring a quite general modeling framework. Together the data and model make a detailed analysis of industry demand possible.

Suggested Citation

Berry, Steven T. and Levinsohn, James A. and Pakes, Ariel, Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market (March 1998). NBER Working Paper No. w6481. Available at SSRN: https://ssrn.com/abstract=226226

Steven T. Berry (Contact Author)

Yale University - Department of Economics ( email )

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James A. Levinsohn

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Ariel Pakes

National Bureau of Economic Research (NBER) ( email )

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Harvard University - Department of Economics ( email )

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