Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns

Buyers in many markets face multiple-discrete choices: they can purchase multiple-units as well as multiple-brands at the same time. This paper presents a multiple-discrete choice model for the analysis of differentiated products demand. Users maximize profits by choosing the number of units of each brand they purchase. The author estimates the model using micro-level data on the demand for personal computers. He uses the estimated demand structure to assess the welfare gains from computerization and technological innovation in peripherals. The estimated return on investment in personal computers is 92 percent. Moreover, a 10 percent increase in the performance-to-price ratio of microprocessors leads to a 22 percent gain in the estimated user surplus. Copyright 1999 by The Review of Economic Studies Limited.