Hacker News new | ask | show | jobs
by huitzitziltzin 1626 days ago
In economics, this is called demand estimation. There is a gigantic empirical literature on how to do it right under a wide variety of assumptions.

It is practiced in industry at Amazon and Microsoft among other places.

Price discrimination comes in three forms and is discussed in any textbook on industrial organization.

There is a lot of good theory AND empirical work for anyone interested in applying these techniques.
1 comments
ignoramous 1626 days ago
> There is a lot of good theory AND empirical work for anyone interested in applying these techniques.

In relation to tech (and software in particular), can you point to some resources that would be useful to explore some of these concepts?

link
huitzitziltzin 1625 days ago
I don't know of published applications of demand estimation in software in particular. I know that Microsoft and Amazon do this to estimate demand for cloud services, but I don't think any of that is publicly available.

In principle, _any_ time that Amazon wants to make a decision about offering an in-house version of some product that is already sold in their stores this is the kind of thing they will do first (again, none of these estimates are public to my knowledge).

There are prominent applications in:

- automobiles (Berry, Levinsohn and Pakes (1995) - the originators of the technique),

- alcohol (Miravete, Seim and Thurk, (2018) - relevant especially to the case of a high-dimensional product space),

- the minivan (Petrin (2003) - relevant to studying a new product),

- breakfast cereal (Nevo (2003) - this is a surprisingly innovative and competitive market category!)

- radio stations (Sweeting (2013) - probably the current state of the art econometrically)

- studying vertically organized markets with unobserved prices (Villas-Boas (2007))

- (There are other applications beyond those listed here - demand estimation is a foundational issue for answering many, many, many economic questions.)

Depending on the specific features of the software demand estimation problem you are thinking about, you may find any of those references helpful.

Two very recent surveys have been published by four of the top people in this area:

1. Gandhi and Nevo: https://www.nber.org/papers/w29257

2. Berry and Haile: http://www.econ.yale.edu/~pah29/Foundations.pdf

Plus there is a now-standard Python implementation of the estimator:

https://pyblp.readthedocs.io/en/stable/

link