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Demand Model Simulation in R with Endogenous Prices and Unobservable Quality

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  • Toro Gonzalez, Daniel

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.

Suggested Citation

  • Toro Gonzalez, Daniel, 2014. "Demand Model Simulation in R with Endogenous Prices and Unobservable Quality," MPRA Paper 59117, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59117
    as

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    File URL: https://mpra.ub.uni-muenchen.de/59117/1/MPRA_paper_59117.pdf
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    References listed on IDEAS

    as
    1. Toro-Gonzalez, Daniel & McCluskey, Jill J. & Mittelhammer, Ron, 2014. "Beer Snobs Do Exist: Estimation of Beer Demand by Type," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 39(2), pages 1-14.
    2. Toro-González Daniel & Gallardo R. Karina & Yan Jia & McCluskey Jill J., 2013. "Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 11(1), pages 101-111, September.
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    More about this item

    Keywords

    R; Control Function; Demand Analisis; Endogeneity;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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