L16: Demand Estimation II Flashcards
1
Q
independence of irrelevant alternatives
A
embedded in the logic assumption
when choosing between two goods, doesn’t matter what the third option is
undesirable property of logit models
2
Q
relaxation of independence of irrelevant alternatives
A
nested logit model
3
Q
demand for cereal estimation - Nevo, 2001
A
looking at the ready to east cereal market which is highly concentrated with similar products
instrument as the price of the same brand in another city (Hausman instruments)
idea is that covariation of prices across cities is driven by common cost shocks and not demand shocks
