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GMM estimation of a structural demand model for yogurt and the effects of the introduction of new brands

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Abstract

The demand structure for yogurt is assumed to be properly described by a one level nested logit model that is applied to aggregate market data. Given the presence of endogenous regressors, suitably lagged endogenous variables (Arellano and Bover in J Econom 68:29–51, 1995; Blundell and Bond in J Econom 87:115–143, 1998) are proposed as instrumental variables. The validity of this set of instruments is discussed and price elasticities and marginal costs are recovered from the demand estimates. Total welfare gains associated to the introduction of two new brands by the same manufacturer are finally computed. Prices and profits decreased and total welfare increased.

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Authors and Affiliations

  1. Facoltà di Economia, University of Turin, Corso Unione Sovietica 218 bis, 10134, Torino, Italy

    Marina Di Giacomo

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  1. Marina Di Giacomo
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Correspondence to Marina Di Giacomo.

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Giacomo, M.D. GMM estimation of a structural demand model for yogurt and the effects of the introduction of new brands. Empirical Economics 34, 537–565 (2008). https://doi.org/10.1007/s00181-007-0135-4

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