Structural Applications of the Discrete Choice Model

A growing body of empirical literature uses structurally-derived economic models to study the nature of competition and to measure explicitly the economic impact of strategic policies. While several approaches have been proposed, the discrete choice demand system has experienced wide usage. The heterogeneous, or ‘‘mixed’’, logit in particular has been widely applied due to its parsimonious structure and its ability to capture flexibly substitution patterns for a large number of differentiated products. We outline the derivation of the heterogeneous logit demand system. We then present a number of applications of such models to various data sources. Finally, we conclude with a discussion of directions for future research in this area.