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Discrete choice model in a market with product differentiation: the Argentine pension fund system

Published online by Cambridge University Press:  16 November 2007

IGNACIO APELLA
IGNACIO APELLA
Affiliation:
Center for the Study of State and Society, Sánchez de Bustamante 27 (C11773AAA) Buenos Aires, Argentina (e-mail: [email protected])
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Abstract

The objective of the paper is to identify the determinants of the market share of each AFJP and the matrix of direct and cross price elasticities, by using a discrete choice model of product differentiation, based on the random utility theory. The results obtained from the estimation of a simple logit model using a panel of quarterly data between December of 1995 and June of 2006 shows the existence of two competitive mechanisms used by firms: prices and a vector of variables explaining horizontal differentiation, such as quantity of branches and salesman. The estimation of the nested-logit model supports the hypothesis of sequential election, where firms are chosen by their price setting strategies, defining two groups of competitors. Finally, the regulatory change that eliminates fixed commissions provides additional importance to prices signals in consumers' utility.

Type
Articles
Information
Journal of Pension Economics & Finance , Volume 7 , Issue 2 , July 2008 , pp. 179 - 197
Copyright
Copyright © 2007 Cambridge University Press

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