GMM estimation of a structural demand model for yogurt and the effects of the introduction of new brands |
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Authors: | Marina Di Giacomo |
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Institution: | (1) Facoltà di Economia, University of Turin, Corso Unione Sovietica 218 bis, 10134 Torino, Italy |
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Abstract: | The demand structure for yogurt is assumed to be properly described by a one level nested logit model that is applied to aggregate
market data. Given the presence of endogenous regressors, suitably lagged endogenous variables (Arellano and Bover in J Econom
68:29–51, 1995; Blundell and Bond in J Econom 87:115–143, 1998) are proposed as instrumental variables. The validity of this
set of instruments is discussed and price elasticities and marginal costs are recovered from the demand estimates. Total welfare
gains associated to the introduction of two new brands by the same manufacturer are finally computed. Prices and profits decreased
and total welfare increased. |
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Keywords: | Nested logit GMM Yogurt Instrumental variables New products |
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