Estimating a Differentiated Products Model with a Discrete/Continuous Choice and Limited Data

This paper specifies a vertically differentiated products model for a product with a discrete/continuous choice. The model is easily estimated with the relatively limited data used in classical demand equation estimation, supplemented by readily available market characteristics data. The model, with some modifications, is estimated with a new dataset (by state and region) for the U.S. Portland cement industry. Plausible patterns of own and cross price elasticities are obtained. The role of market characteristics is estimated generalizing the applicability of the results to other markets and periods.