Attribute Choices and Structural Econometrics of Price Elasticity of Demand

The identi¯cation of demand parameters from individual data may be impossible due to the lack of price variation within the sample. Even if panel data are available, the slow modi¯cation of price within the menu and the usual small number of observed periods make very hazardous the estimation of prices e®ects. The aim of this paper is to deliver an empirical methodology for the treatment of this kind of data. The approach relies on a simple hedonic model of consumer behavior wherein aggregate demand and expenditure depend on an heterogeneity factor. Using the restrictions created by this structural model, we consider the identi¯cation of the price elasticity. We ¯rst show that the price elasticities as well as other parameters that summarize the consumers'preferences are identi¯ed in a two{period case. An empirical illustration with actual data thus illustrates the potential of the approach. The paper then propose several extensions of the model { multi{products, non{linear demand { and determine conditions for identi¯cation