"A Structural Model of Product Line Pricing in Differentiated Product Markets"
(by Isis Durrmeyer, Matthew Gentry, Andras Niedermayer, Artyom Shneyerov)

Abstract : 

We develop a new empirical model of market equilibrium with horizontal and vertical product differentiation. Our model is a combination of Berry, Levinsohn and Pakes’s (1995) discrete choice model and an extension of Rochet and Stole’s (2002) non-linear pricing (or second-degree price discrimination) theory to multiproduct firms. We propose a new method to identify demand and supply primitives. This methodology leverages the rich theoretical framework and provides identification of the parameters of interest under very mild assumptions on functional forms. We apply our new methodology to the French automobile market and measure the importance of second-degree price discrimination.