The Econometric SocietyEdited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
Econometrica: Sep, 2008, Volume 76, Issue 5
https://doi.org/10.3982/ECTA4158
p. 1017-1074
Michelle Sovinsky Goeree
Traditional discrete‐choice models assume buyers are aware of all products for sale. In markets where products change rapidly, the full information assumption is untenable. I present a discrete‐choice model of limited consumer information, where advertising influences the set of products from which consumers choose to purchase. I apply the model to the U.S. personal computer market where top firms spend over $2 billion annually on advertising. I find estimated markups of 19% over production costs, where top firms advertise more than average and earn higher than average markups. High markups are explained to a large extent by informational asymmetries across consumers, where full information models predict markups of one‐fourth the magnitude. I find that estimated product demand curves are biased toward being too elastic under traditional models. I show how to use data on media exposure to improve estimated price elasticities in the absence of micro ad data.
This supplement provides technical details of the data used to estimate the limited information model presented in the main paper.
This supplement consists of three sections. The first section presents a proof showing that the fixed-point algorithm is a contraction mapping. The second section contains parameter estimates for alternative models discussed. The third section illustrates why the full information and limited information models will (most likely) result in different estimates for price elasticities of demand.
This zip file contains data and Fortran programs.
This supplement provides technical details of the data used to estimate the limited information model presented in the main paper.
This supplement consists of three sections. The first section presents a proof showing that the fixed-point algorithm is a contraction mapping. The second section contains parameter estimates for alternative models discussed. The third section illustrates why the full information and limited information models will (most likely) result in different estimates for price elasticities of demand.
This zip file contains data and Fortran programs.
March 5, 2024
The terms of the Editors of the Econometric Society's three journals end June 30, 2025. We are pleased to announce the incoming Editors and to thank the outgoing Editors for their excellent and continuing service.
Econometrica: Since 2019, Guido Imbens has served as the 14th Editor of Econometrica. On July 1, 2025, Marina Halac will become the Editor.
Quantitative Economics: Stéphane Bonhomme has been the Editor of Quantitative Economics since 2021. His successor will be Bernard Salanié.
Theoretical Economics: The Editor of Theoretical Economics since 2021 has been Simon Board. Taking over for him in July 2025 will be Federico Echenique.
Guido, Stéphane, and Simon have been outstanding Editors. We are grateful to them for the work they have done and will continue to do, and we look forward to further congratulating them next year. We believe Marina, Bernard, and Federico will be outstanding successors and we thank them in advance for their service.
Finally, we are grateful to Larry Samuelson for chairing all three search committees, and we thank the search committee members for their hard and fruitful work:
Econometrica: Christian Dustmann, Lars Hansen, Alessandro Lizzeri, George Mailath, Ariel Pakes, Helene Rey, and Elie Tamer.
QE: Kate Ho, Michael Keane, Felix Kubler, Whitney Newey, and Frank Schorfheide.
TE: Jeff Ely, Johannes Horner, Gilat Levy, Meg Meyer, and Ran Spiegler.
