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Embedding consumer taste for location into a structural model of equilibrium
Whelan, Ciara; Walsh, Patrick P.; Mariuzzo, Franco
Given that brands (products) are location specific in terms of coverage of retail stores, we allow consumers to have preferences over location and products to carry distribution costs, alongside preferences and costs over other observable and unobservable product characteristics. We embed these considerations into Berry, Levinsohn and Pakes (1995) to jointly estimate demand and cost parameters for brands (products) in Retail Carbonated Soft Drinks. Allowing for location has a very significant impact on estimated primitives and the predictive power of the structural model. As a counterfactual exercise we show the effects on welfare of an equilibrium that results from a change in the distribution of consumer taste for location.
Keyword(s): Consumer taste for location distributions; Differentiated products; Discrete choice; Aggregation; Structural model; Retail carbonated soft drinks; L11; L62; Consumers' preferences; Product differentiation; Soft drinks
Publication Date:
Type: Working paper
Peer-Reviewed: Unknown
Language(s): English
Institution: University College Dublin
Publisher(s): University College Dublin; School of Economics
File Format(s): other; application/pdf
First Indexed: 2012-08-25 05:25:13 Last Updated: 2018-10-11 16:36:21