customer rating (customer rating) and the number of
reviewers (number of reviewers) who have reviewed
the product. [We use the fixed effects (within) transformation (Wooldridge, 2002, Chapter 10.5) to control
for unobserved heterogeneity across products.]
We can use the results of this regression to calculate the relevant own- and cross-price elasticities
ηii and ηij , respectively. Note that φ is a measure of
how sensitive the product’s own sales rank is to the
product’s own price, while γj is a measure of how sensitive the product’s own sales rank is to the price of the
substitute product. Let (pi , Qi ) represent the quantity
and price of product i and let (pj , Qj ) represent the
quantity and price of product j . One can easily show
that having estimated the parameters φ and each of
the γj ’s from the above regression, the own-price elasticity of demand for product i (Mas-Collel, Whinston
and Green, 1995) is given by
customer rating (customer rating) and the number of
reviewers (number of reviewers) who have reviewed
the product. [We use the fixed effects (within) transformation (Wooldridge, 2002, Chapter 10.5) to control
for unobserved heterogeneity across products.]
We can use the results of this regression to calculate the relevant own- and cross-price elasticities
ηii and ηij , respectively. Note that φ is a measure of
how sensitive the product’s own sales rank is to the
product’s own price, while γj is a measure of how sensitive the product’s own sales rank is to the price of the
substitute product. Let (pi , Qi ) represent the quantity
and price of product i and let (pj , Qj ) represent the
quantity and price of product j . One can easily show
that having estimated the parameters φ and each of
the γj ’s from the above regression, the own-price elasticity of demand for product i (Mas-Collel, Whinston
and Green, 1995) is given by
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