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

Abstract

In this paper we provide an algorithm for estimating characteristic based demand models from alternative data sources, and apply it to new data on the market for passenger vehicles. We find that, provided care is taken in constructing the demand system and rich enough data are available, the characteristic based model can both rationalize existing results and provide realistic out of sample predictions.Product Differentiation, Autos, Demand Estimation