Calibrating the AIDS and Multinomial Logit Models with Observed Product Margins
We show how observed product margins may be used in lieu of an observed market elasticity to calibrate parameters for two commonly used demand forms: the Almost Ideal Demand System (AIDS) and the multinomial logit. This technique is useful for antitrust practitioners interested in simulating the eects of a merger, since estimates of product margins are often easier to obtain than estimates of market elasticities.
Keywords: demand calibration, multinomial logit, almost ideal demand system, AIDS
JEL classification: L40, K21