Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society
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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Testing the nested fixed-point algorithm in BLP random coefficients demand estimation

Vol.28, No.4, December , 1–21



  •   (Department of Economics, Korea University)

  •   (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).


Keywords
   random coefficients logit demand; numerical methods; nested fixed-point algorithm; Newton's method

JEL classification codes
   C1, L1
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