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Endogenous product choice: a progress report


Crawford, Gregory S (2012). Endogenous product choice: a progress report. International Journal of Industrial Organization, 30(3):315-320.

Abstract

Empirical models of differentiated product demand are widely used by both academics and practitioners. While these methods treat carefully the potential endogeneity of price, until recently they have assumed the number and characteristics of the products offered by firms are exogenous. This paper presents a progress report on an ongoing research agenda to address this issue. First, it summarizes how the appropriate choice of “orthogonal” instruments can yield consistent estimates of own and cross-price elasticities in the presence of endogenous product characteristics. Second, it summarizes how to measure “quality markups” and the welfare consequences of endogenous product quality in U.S. cable television markets. Related papers and extensions to consider multiple product characteristics and dynamics are also discussed.

Abstract

Empirical models of differentiated product demand are widely used by both academics and practitioners. While these methods treat carefully the potential endogeneity of price, until recently they have assumed the number and characteristics of the products offered by firms are exogenous. This paper presents a progress report on an ongoing research agenda to address this issue. First, it summarizes how the appropriate choice of “orthogonal” instruments can yield consistent estimates of own and cross-price elasticities in the presence of endogenous product characteristics. Second, it summarizes how to measure “quality markups” and the welfare consequences of endogenous product quality in U.S. cable television markets. Related papers and extensions to consider multiple product characteristics and dynamics are also discussed.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Strategy and management, industrial and manufacturing engineering, industrial relations, aerospace engineering, endogenous product choice, endogenous product characteristics, endogenous quality, orthogonal instruments, welfare, cable television
Language:English
Date:May 2012
Deposited On:13 Sep 2019 12:16
Last Modified:25 Sep 2019 00:45
Publisher:Elsevier
ISSN:0167-7187
OA Status:Green
Publisher DOI:https://doi.org/10.1016/j.ijindorg.2011.12.006

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