Market Segmentation And the Sources of Rents From Innovation Personal Computer

Cover 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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