Logit Demand Estimation Under Competitive Pricing Behavior: An Equilibrium Framework

摘要: Discrete choice models of demand have typically been estimated assuming that prices are exogenous. Since unobservable (to the researcher) product attributes, such as coupon availability, may impact consumer utility well price setting by firms, we treat endogenous. Specifically, assumed to be equilibrium outcomes Nash competition among manufacturers and retailers. To empirically validate assumptions, estimate logit systems jointly with pricing equations for two categories using retail scanner data cost on factor prices. In each category, find statistical evidence endogeneity. We also estimates response parameter brand-specific constants generally biased downward when endogeneity is ignored. Our framework provides explicit value created a brand, i.e., difference between consumers' willingness pay brand its production. develop theoretical propositions about relationship creation competitive advantage use our empirical results illustrate how firms alternative strategies accomplish advantage.