A Pure Characteristics Demand Model for Automobile Variants

Abstract

This paper suggests a way to estimate a structural demand model for differentiated products using a single cross section of productlevel data. Bajari and Benkard (2005) use revealed-preference bounds for the taste coefficients. In order to obtain point estimates, I modify their model in two ways. First, I impose additional bounds on the willingness to pay for characteristics, based on the price consumers actually paid for the product they purchased. Secondly, I make an assumption about the distribution of taste coefficients within the bounds for each product. I estimate the model with data on new car sales in Norway.