Title
Improving the performance of random coefficients demand models : the role of optimal instruments Improving the performance of random coefficients demand models : the role of optimal instruments
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Amsterdam ,
Subject
Sociology
Economics
Mathematics
Source (journal)
Journal of econometrics. - Amsterdam
Volume/pages
179(2014) :1 , p. 83-98
ISSN
0304-4076
ISI
000331505100006
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
We shed new light on the performance of Berry, Levinsohn and Pakes (1995) GMM estimator of the aggregate random coefficient logit model. Based on an extensive Monte Carlo study, we show that the use of Chamberlains (1987) optimal instruments overcomes many problems that have recently been documented with standard, non-optimal instruments. Optimal instruments reduce small sample bias, but they prove even more powerful in increasing the estimators efficiency and stability. We consider a wide variety of data-generating processes and an empirical application to the automobile market.Wealso consider the gains of other recent methodological advances when combined with optimal instruments.
E-info
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