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http://hdl.handle.net/10419/55600
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| Title: | | Estimating demand in search markets: The case of online hotel bookings  |
| Authors: | | Koulayev, Sergei |
| Issue Date: | | 2009 |
| Series/Report no.: | | Working paper series // Federal Reserve Bank of Boston 09-16 |
| Abstract: | | In this paper, we emphasize that choice sets generated by a search process have two properties: first, they are limited; second, they are endogenous to preferences. Both factors lead to biased estimates in a static demand framework that takes choice sets as given. To correct for this bias, we estimate a structural model of search for differentiated products, using a unique dataset of consumer online search for hotels. Within a nested logit utility model, we show that the mean utility function and the search cost distribution of a representative consumer are non-parametrically identified, given our data. Using our model's estimates, we quantify both sources of bias: they lead to overestimation of price elasticity by a factor of five and four, respectively. The median search cost is about 38 dollars per 15 hotels; we also present some evidence on multi-modality of search cost distribution. |
| JEL: | | C14 D43 D83 L13 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Working Paper Series, Federal Reserve Bank of Boston
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