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

Posted: 26 Jan 2004

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

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Abstract

In this paper, we consider how rich sources of information on consumer choice can help to identify demand parameters in a widely used class of differentiated products demand models. Most important, we show how to use "second-choice" data on automotive purchases to obtain good estimates of substitution patterns in the automobile industry. We use our estimates to make out-of-sample predictions about important recent changes in industry structure.

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. Journal of Political Economy, Vol. 112, No. 1, Pt. 1, pp. 68-105, February 2004. Available at SSRN: https://ssrn.com/abstract=489663

Steven T. Berry (Contact Author)

Yale University - Department of Economics ( email )

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James A. Levinsohn

University of Michigan ( email )

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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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