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Bayesian Analysis of Random Coefficient Logit Models Using Aggregate Data

Bayesian Analysis of Random Coefficient Logit Models Using Aggregate Data PDF Author: Renna Jiang
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Languages : en
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Book Description
We present a Bayesian approach for analyzing aggregate level sales data in a market with differentiated products. We consider the aggregate share model proposed by Berry, Levinsohn and Pakes (1995) which introduces a common demand shock into an aggregated random coefficient logit model. A full likelihood approach is possible with a specification of the distribution of the common demand shock. We introduce a re-parameterization of the covariance matrix to improve the performance of the random walk Metropolis for covariance parameters. We illustrate the usefulness of our approach with both actual and simulated data. Sampling experiments show that our approach performs well relative to the GMM estimator even in the presence of a mis-specified shock distribution. We view our approach as useful for those who willing to trade off one additional distributional assumption for increased efficiency in estimation.