1. Discuss how the full (random-coefficients) model conceptually differs from the (IV) logit demand...

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1. Discuss how the full (random-coefficients) model conceptually differs from the (IV) logit demand model. What do the random coefficients tell us?2. The author estimates covariances between tastes for store brands, tastes for national brands, and the outside option. What do these estimates suggest? 3. Explain how the author estimates the supply-side model and specifically how this relates to the estimated demand model.4. Discuss the difference between the results of the two cases presented in the first counterfactual exercise.

Neenisha · Accepted Answer

1. Random coefficient model
Random Coefficient Models Are the models in which the coefficient is not fixed rather random variable. Coefficients are allowed to vary, In these kind of models we are not only modelling the means but also the variances. This means that the relation between independent and dependent variable is varying. The dependent variable is continuous variable and not a binary variable. The independent variables can be either binary or continuous. Random Coefficients tell us the change in dependent variable due to 1 unit change in independent variable.
Logit probit model 
In these kind of models the dependent variable is not a continuous variable but a discrete variable which can take values such as 0 or 1.

1. Discuss how the full (random-coefficients) model conceptually differs from the (IV) logit demand model. What do the random coefficients tell us?2. The author estimates covariances between tastes...

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