Demand Model Simulation in R with Endogenous Prices and Unobservable Quality

Toro Gonzalez, Daniel (2014): Demand Model Simulation in R with Endogenous Prices and Unobservable Quality.

Abstract

The aim of the present routine is to simulate a demand equation with endogenous prices and unobservable product quality and to retrieve the original parameters using the Control Function (CF) approach. The CF approach is a very useful and simple method to obtain unbiased estimates. The present R code helps to understand the underlying structure of the endogeneity problem in demand estimations. Results support the important bias correction of the CF approach.

• Item Type: MPRA Paper
• Language: English
• Keywords: R, Control Function, Demand Analisis, Endogeneity
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D49 - Other; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E27 - Forecasting and Simulation: Models and Applications

References

Article: Beer Snobs Do Exist: Estimation of Beer Demand by Type. Daniel Toro-González, Jill J Mccluskey, Ron C Mittelhammer. Journal of Agricultural and Resource Economics 08/2014; 39(2):1-14.

Effect of Deficit Irrigation on Yield, Quality, and Costs of the Production of Native Spearmint. Prossie Nakawuka, Troy R. Peters, Karina R. Gallardo, Daniel Toro-Gonzalez, Romulus O. Okwany, Douglas B. Walsh. Journal of Irrigation and Drainage Engineering 02/2014; 140(5).

Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes. Daniel Toro González, R. Karina Gallardo, Jia Yan, Jill J. McCluskey. Journal of Agricultural & Food Industrial Organization 09/2013; 11(1):101–111.