We explore the determinants of demand curvature and pass-through in aggregate, unit-demand, discrete choice mixed logit models. Accurate pass-through estimates are at the heart of analyses of mergers, taxation, tariffs, cost shocks, and exchange rates when firms have market power. To overcome the inherent curvature restrictions in multinomial logit models, we highlight the need to incorporate heterogeneity in both price responsiveness and preferences for product characteristics. A flexible and parsimonious specification of preference heterogeneity expands the feasible range of elasticity-curvature pairs up to those of the constant elasticity of substitution (CES) demand. We demonstrate empirically significant differences in estimated elasticity and curvature compared to simpler models and highlight their economic relevance in the context of price discrimination.


This talk is presented by the Applied Microeconomics/Industrial Organization Seminar, sponsored by the Department of Economics with generous gifts given through the Jean Coven Speakers Fund in Economics and the Economics Strategic Fund.

This talk is presented by the Public Finance Seminar, sponsored in part by the Department of Economics with generous gifts given through the Elizalde-Winikates Family Fund in Economics and the Economics Strategic Fund.