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

Berry, Steven; Levinsohn, James A.; Pakes, Ariel

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

36 Pages Posted: 27 Nov 2001

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

There are 3 versions of this paper

Date Written: November 2001

Abstract

In this paper we provide an algorithm for estimating characteristic based demand models from alternative data sources, and apply it to new data on the market for passenger vehicles. We find that, provided care is taken in constructing the demand system and rich enough data are available, the characteristic based model can both rationalize existing results and provide realistic out of sample predictions.

Keywords: Product Differentiation, Autos, Demand Estimation

JEL Classification: D43

Suggested Citation: 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 (November 2001). Available at SSRN: https://ssrn.com/abstract=291416