Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/53909 
Authors: 
Year of Publication: 
2011
Series/Report no.: 
Bank of Canada Working Paper No. 2011-27
Publisher: 
Bank of Canada, Ottawa
Abstract: 
Consumers often purchase more than one differentiated product, assembling a portfolio, which might potentially affect substitution patterns of demand and, as a consequence, oligopolistic firms' pricing strategies. This paper studies such consumers' portfolio considerations by developing a structural model that allows for flexible complementarities/substitutabilities depending on consumer attributes and product characteristics. I estimate the model using Japanese household-level data on automobile purchasing decisions. My estimates suggest that complementarities arise when households purchase a combination of one small automobile and one minivan as their portfolio. Ignoring such effects leads to a overstated counterfactual analysis. Simulation results suggest that a policy proposal of repealing the current tax subsidies for small ecofriendly automobiles would decrease the demand for those automobiles by 9%; less than the 14% drop predicted by a standard single discrete choice model.
Subjects: 
Economic models
Market structure and pricing
JEL: 
D4
L5
Q5
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
431.13 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.