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2021 Working Papers

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1351 - A BLP Demand Model of Product-Level Market Shares with Complementarity

Ao Wang

Applied researchers most often estimate the demand for differentiated products assuming that at most one item can be purchased. Yet simultaneous multiple purchases are pervasive. Ignoring the interdependence among multiple purchases can lead to erroneous counterfactuals, in particular, because complementarities are ruled out. I consider the identification and estimation of a random coefficient discrete choice model of bundles, namely sets of products, when only product-level market shares are available. This last feature arises when only aggregate purchases of products, as opposed to individual purchases of bundles, are available, a very common phenomenon in practice. Following the classical approach with aggregate data, I consider a two-step method. First, using a novel inversion result in which demand can exhibit Hicksian complementarity, I recover the mean utilities of products from product-level market shares. Second, to infer the structural parameters from the mean utilities while dealing with price endogeneity, I use instrumental variables. I propose a practically useful GMM estimator whose implementation is straightforward, essentially as a standard BLP estimator. Finally, I estimate the demand for Ready-To-Eat (RTE) cereals and milk in the US. The demand estimates suggest that RTE cereals and milk are overall complementary and the synergy in consumption crucially depends on their characteristics. Ignoring such complementarities results in misleading counterfactuals.

1340 - Disguising prejudice : Popular rationales as excuses for intolerant expression

Leonardo Bursztyn, Ingar Haaland, Aakaash Rao & Chris Roth

We study how popular rationales enable public anti-minority actions. Rationales to oppose minorities genuinely persuade some people. But they also provide “excuses” that may reduce the stigma associated with anti-minority expression, thereby increasing anti-minority behavior. In a first experiment, participants learn that a previous respondent authorized a donation to an anti-immigrant organization and then make an inference about the respondent’s underlying motivations. Participants informed that their matched respondent learned about a study claiming that immigrants increase crime rates before authorizing the donation see the respondent as less intolerant. In a second experiment, participants learn about that same study and then choose whether to authorize a public donation to the anti-immigrant organization. Participants informed that their exposure to the rationale will be publicly observable are substantially more likely to make the donation than participants who are informed that their exposure will remain private. A final experiment shows that people are more willing to post anti-immigrant content on social media when they can use an anti-immigrant video clip from Fox News as an excuse. Our findings suggest that prominent public figures can lower the social cost of intolerant expression by popularizing rationales, increasing anti-minority expression.