Abstract
This paper examines the numerical properties of the nested fixed-point algorithm (NFP) in the estimation of Berry et al. (1995) random coefficient logit demand model. Dubé et al. (2012) find the bound on the errors of the NFP estimates computed by contraction mappings (NFP/CTR) has the order of the square root of the inner loop tolerance. Under our assumptions, we theoretically derive an upper bound on the numerical bias in the NFP/CTR, which has the same order of the inner loop tolerance. We also discuss that, compared with NFP/CTR, NFP using Newton's method has a smaller bound on the estimate error.
| Original language | English |
|---|---|
| Pages (from-to) | 67-70 |
| Number of pages | 4 |
| Journal | Economics Letters |
| Volume | 149 |
| DOIs | |
| Publication status | Published - 2016 Dec 1 |
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Keywords
- Nested fixed-point algorithm
- Newton's method
- Numerical methods
- Random coefficients logit demand
ASJC Scopus subject areas
- Finance
- Economics and Econometrics
Cite this
Revisiting the nested fixed-point algorithm in BLP random coefficients demand estimation. / Lee, Jinhyuk; Seo, Kyoungwon.
In: Economics Letters, Vol. 149, 01.12.2016, p. 67-70.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Revisiting the nested fixed-point algorithm in BLP random coefficients demand estimation
AU - Lee, Jinhyuk
AU - Seo, Kyoungwon
PY - 2016/12/1
Y1 - 2016/12/1
N2 - This paper examines the numerical properties of the nested fixed-point algorithm (NFP) in the estimation of Berry et al. (1995) random coefficient logit demand model. Dubé et al. (2012) find the bound on the errors of the NFP estimates computed by contraction mappings (NFP/CTR) has the order of the square root of the inner loop tolerance. Under our assumptions, we theoretically derive an upper bound on the numerical bias in the NFP/CTR, which has the same order of the inner loop tolerance. We also discuss that, compared with NFP/CTR, NFP using Newton's method has a smaller bound on the estimate error.
AB - This paper examines the numerical properties of the nested fixed-point algorithm (NFP) in the estimation of Berry et al. (1995) random coefficient logit demand model. Dubé et al. (2012) find the bound on the errors of the NFP estimates computed by contraction mappings (NFP/CTR) has the order of the square root of the inner loop tolerance. Under our assumptions, we theoretically derive an upper bound on the numerical bias in the NFP/CTR, which has the same order of the inner loop tolerance. We also discuss that, compared with NFP/CTR, NFP using Newton's method has a smaller bound on the estimate error.
KW - Nested fixed-point algorithm
KW - Newton's method
KW - Numerical methods
KW - Random coefficients logit demand
UR - http://www.scopus.com/inward/record.url?scp=84994012335&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84994012335&partnerID=8YFLogxK
U2 - 10.1016/j.econlet.2016.10.019
DO - 10.1016/j.econlet.2016.10.019
M3 - Article
AN - SCOPUS:84994012335
VL - 149
SP - 67
EP - 70
JO - Economics Letters
JF - Economics Letters
SN - 0165-1765
ER -