Econometric Modeling of Differential Durable Goods Markets: an Application to Telephone.

As the structure of consumer preferences plays a crucial role in the analysis of differentiated product markets, estimation of demand systems is a sensitive task. This paper contributes to this project in two ways. First, we develop a method to deal with the simultaneous choice of an equipment and a level of usage. This question is crucial for durable goods. Second, our method is suited for households, i.e., micro data. The main feature of our method is to specify a direct utility function, which provides correct substitution patterns among products at the aggregate level, i.e., compatible with the intuition.