Journal Article

Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns

Igal Hendel

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 66, issue 2, pages 423-446
Published in print April 1999 | ISSN: 0034-6527
Published online April 1999 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00093
Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns

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Buyers in many markets face multiple-discrete choices: they can purchase multiple-units as well as multiple-brands at the same time. This paper presents a multiple-discrete choice model for the analysis of differentiated products demand. Users maximize profits by choosing the number of units of each brand they purchase. I estimate the model using micro-level data on the demand for personal computers. I use the estimated demand structure to assess the welfare gains from computerization and technological innovation in peripherals. The estimated return on investment in personal computers is 92%. Moreover, a 10% increase in the performance-to-price ratio of microprocessors leads to a 2·2% gain in the estimated user surplus.

Journal Article.  0 words. 

Subjects: Economics

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