Business, Management and Accounting
6 years ago

Control function approach boosts retailer profits by 3% by fixing price endogeneity.

1 view
European Journal of Operational Research
Addressing endogeneity in aggregate logit models with time-varying parameters for optimal retail-pricing
Daniel Guhl

Paper Summary

Price endogeneity in demand models can lead to incorrect estimates and managerial decisions. A new control function approach is proposed to address this issue when price parameters change over time. The method is shown to be effective in correcting biases and can increase retailer profits by 3%.

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