Econometric Estimation of PCAIDS Models

Germán Coloma, Universidad del Centro de Estudios Macroeconómicos de Argentina

Abstract

This paper presents a version of the proportionally calibrated almost ideal demand system (PCAIDS) model, useful for merger simulations, which can be econometrically estimated using price data for two firms in a market. PCAIDS is therefore seen as a set of restrictions to be imposed in an econometric estimation, and not only as a pure calibration method. The proposed model is applied to a database of the Argentine gasoline market, and its results are compared to the ones obtained with other alternative specifications.