Bounds on willingness-to-pay in a pure-characteristics model of the demand for automobile variants

Abstract

I estimate a pure-characteristics discrete choice model of the demand for automobile engine and body style variants, using market-level data. Revealed preference bounds and imposed bounds on the willingness to pay for characteristics as a percentage of product price are sufficient to identify nonparametric taste distributions. Substitution patterns as determined by closest substitutes appear very realistic. The model can be estimated on a single cross-section of data.