A HYBRID DISCRETE CHOICE MODEL OF DIFFERENTIATED PRODUCT DEMAND WITH AN APPLICATION TO PERSONAL COMPUTERS

In this article, I consider a new discrete choice model of differentiated product demand that distinguishes a brand‐level differentiation from a product‐level differentiation. The model is a hybrid of the random coefficient logit model of Berry et al. (Econometrica 63 (1995), 841–90) and the pure characteristics model of Berry and Pakes (International Economic Review 48 (2007), 1193–1225) and describes markets where firms offer multiple products of different qualities under the same brand name. I compare the hybrid model with existing models using data on personal computers. Using the estimates of the hybrid model, I also provide empirical evidence that firms reposition their brands in a postmerger market.