Events

Ms. Linqi Zhang
Ph.D. candidate in Economics
Boston College

Within the framework of Berry (1994) and Berry, Levinsohn, and Pakes (1995), I
prove that market size can be point identied along with all demand parameters in
a random coecients logit (BLP) model. I require no additional data beyond what
is needed to estimate standard BLP models. Identication comes from the exogenous
variation in product characteristics across markets and the nonlinearity of the demand
system. I apply the method to a merger simulation in the carbonated soft drinks
market in the US, and nd that assuming a market size larger than the true estimated
size would underestimate merger price increases by 31% on average.