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Journal of Economic Theory and Econometrics
Journal of the Korean Econometric Society
Testing the nested fixed-point algorithm in BLP random coefficients demand estimation
Vol.28, No.4, December 2017, 1–21
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Jinhyuk Lee
(Department of Economics, Korea University)
Kyoungwon Seo
(Business School, Seoul National University)
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Abstract
This paper examines the numerical properties of the nested fixed-point algorithm (NFP) using Monte Carlo experiments in the estimation of Berry, Levinsohn, and Pakes's (1995) random coefficient logit demand model. We find that in speed, convergence and accuracy, nested fixed-point (NFP) approach using Newton's method performs well like a mathematical programming with equilibrium constraints (MPEC) approach adopted by Dube, Fox, and Su (2012).
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Keywords
random coefficients logit demand; numerical methods; nested fixed-point algorithm; Newton's method |
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