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The Impact of Omitting Promotion Variables on Simulation Experiments

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  • David Weiskopf

Abstract

Using store-level scanner data, elasticity matrices are estimated using a twotiered demand system. Two basic models are estimated, one with promotion variables and one without. Differences between the estimates across the two models are statistically significant. However, when the elasticities are used as 'inputs' into several simulation exercises, there are only small differences in merger effects and patent damage estimates.The results suggest that the differences are not 'economically' significant.

Suggested Citation

  • David Weiskopf, 2000. "The Impact of Omitting Promotion Variables on Simulation Experiments," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(2), pages 159-166.
    • Handle: RePEc:taf:ijecbs:v:7:y:2000:i:2:p:159-166
    DOI: 10.1080/13571510050084505
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    References listed on IDEAS

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    1. Jerry Hausman & Gregory Leonard & J. Douglas Zona, 1994. "Competitive Analysis with Differentiated Products," Annals of Economics and Statistics, GENES, issue 34, pages 143-157.
    2. repec:adr:anecst:y:1994:i:34:p:06 is not listed on IDEAS
    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    4. Aviv Nevo & Catherine Wolfram, 1999. "Prices and Coupons for Breakfast Cereals," NBER Working Papers 6932, National Bureau of Economic Research, Inc.
    5. Philip Crooke & Luke Froeb & Steven Tschantz & Gregory Werden, 1999. "Effects of Assumed Demand Form on Simulated Postmerger Equilibria," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(3), pages 205-217, November.
    6. Gregory Werden & Luke Froeb & James Langenfeld, 2000. "Lost Profits from Patent Infringement: The Simulation Approach," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(2), pages 213-227.
    7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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    Cited by:

    1. Fabian Bergès & Daniel Hassan & Sylvette Monier-Dilhan, 2013. "Are Consumers More Loyal To National Brands Than To Private Labels?," Bulletin of Economic Research, Wiley Blackwell, vol. 65, pages 1-16, May.
    2. Tenn, Steven & Froeb, Luke & Tschantz, Steven, 2010. "Mergers when firms compete by choosing both price and promotion," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 695-707, November.

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