Market Segmentation And the Sources of Rents From Innovation Personal Computer
Market Segmentation And the Sources of Rents From Innovation Personal Computer
Timothy F Bresnahan
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E is the corresponding equation determining the market share of product j, where Gj is the partial derivative of j with respect to e*^. McFadden (1978) suggests that Proposition 1 can serve as a straightforward and general purpose specification tool: by specifying the function G(-), the modeler chooses the pattern of dependency of r|yS across products. Thus, Proposition 1 provides a method for parameterizing the cross-product substitution matrix. Our model will utilize this theorem to parameter...ize a random utility model which incorporates /Jow-we5/ec/ cross-product correlations in t].^" In order to make the logic of the theorem more understandable, consider the G(. ) function associated with a traditional specification, the one-level NML. To incorporate potential correlation among products according to whether or not the product is at the technological frontier (F versus NF), the flmction G(-) takes the form. " The limit of G(-) as any argument goes to «> must be equal to +~. Mixed partials of G(-) must alternate in sign and first partials must be non-negative (McFadden, 1978).
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