To Answer The Questions In This Part Of The Problem Set You Need To Us To answer the questions in this part of the problem set you need to use the dataset verboven_cars.csv. Use this dataset to implement the estimations described below. Please, provide the STATA code that you use to obtain the results. For all the models that you estimate below, impose the following conditions: Use prices measured in euros (eurpr). For the product characteristics in the demand system, include the characteristics: horsepower (hp), fuel (li), width (wi), height (he), weight (we), and domestic (home). For market size (number of consumers), use Population/4, i.e., pop/4. You need to construct the market share of each car model in each country and year: sjmt = qjmt/Hmt, where qjmt is the total units sold of car model j in country m and year t (qu in the data), and Hmt is the total potential consumers (market size). Include fixed effects for country (ma), year (ye), and brand (brd). Include as explanatory variables the market characteristics: log of population (ln(pop)) and log of GDP (log(gdp)).
Paper For Above instruction The analysis of demand in automobile markets often involves complex econometric models, especially when accounting for product heterogeneity, market structure, and unobserved factors. In this context, the use of logit models with fixed effects is a common approach to capturing consumer choice behavior and market dynamics. This paper implements a series of estimations using the dataset verboven_cars.csv to analyze the demand system for cars, focusing on the effects of product characteristics, market size, and price variations. Additionally, the work explores the use of instrumental variables to address endogeneity concerns, providing insights into consumer willingness to pay for specific vehicle features and the overall price elasticity of demand. The initial step involves estimating a standard logit model with fixed effects for country, year, and brand. The model considers prices in euros, along with product-specific features such as horsepower, fuel type, dimensions, weight, and whether the car is domestic. The fixed effects control for unobserved heterogeneity across different markets and brands, ensuring that the estimated parameters reflect true