TY  - JOUR
AU  - Benkard,C. Lanier
AU  - Bajari,Patrick
TI  - Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10278
PY  - 2004
Y2  - February 2004
UR  - http://www.nber.org/papers/w10278
L1  - http://www.nber.org/papers/w10278.pdf
N1  - Author contact info:
C. Lanier Benkard
Stanford Graduate School of Business
655 Knight Way
Stanford, CA 94305
Tel: 650 725-2173
E-Mail: lanierb@stanford.edu

Patrick Bajari
Professor of Economics
University of Minnesota
4-101 Hanson Hall
1925 4th Street South
Minneapolis, MN 55455
Tel: 612/625-8369
Fax: 612/624-0209
E-Mail: bajari@econ.umn.edu
AB  - We study the identification and estimation of Gorman-Lancaster style hedonic models of demand for differentiated products for the case when one product characteristic is not observed. Our identification and estimation strategy is a two-step approach in the spirit of Rosen (1974). Relative to Rosen's approach, we generalize the first stage estimation to allow for a single dimensional unobserved product characteristic, and also allow the hedonic pricing function to have a general, non-additive structure. In the second stage, if the product space is continuous and the functional form of utility is known then there exists an inversion between the consumer's choices and her preference parameters. This inversion can be used to recover the distribution of random coefficients nonparametrically. For the more common case when the set of products is finite, we use the revealed preference conditions from the hedonic model to develop a Gibbs sampling estimator for the distribution of random coefficients. We apply our methods to estimating personal computer demand.
ER  -