blp

Introduction This note goes over the Random Coefficient Logit model, often referred to as the “BLP” model, proposed by Berry et al. (1995). This model offers a method for estimating demand that considers the varying demand responses to changes in price while addressing issues related to price endogeneity. Outline Begin by establishing a indirect utility function for consumer i consuming product j in market m. Transform the indirect utiltiy function into a composite of mean utility, which applies uniformly to all consumers using product j in market m, and individual-specific random components that capture consumer tastes (preferences)....