Abstract
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.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 423-446 |
| Number of pages | 24 |
| Journal | Review of Economic Studies |
| Volume | 66 |
| Issue number | 2 |
| DOIs | |
| State | Published - Apr 1999 |
Funding
Acknowledgements. I am grateful to Ariel Pakes, Zvi Griliches, Moshe Buchinsky and Steve Berry for their invaluable advice and to Manuel Trajtenberg who provided the motivation for this study and access to the data. Thanks to Eric Edmonds, Ariel Hendel, Bo Honore, and two referees for useful comments. Financial support from the Sloan Foundation Grant to the NBER and the Sloan Doctoral Dissertation Fellowship are gratefully acknowledged. The errors are all mine.
ASJC Scopus subject areas
- Economics and Econometrics