We review the flourishing literature on the automobile industry since the seminal work of Berry, Levinsohn, and Pakes (1995), or briefly BLP. Their work provides a structural equilibrium framework that forms a basis for conducting policy counterfactuals in several key areas of interest: competition policy and antitrust, trade policy, and taxation and environmental policy. The demand side of the “BLP framework” is micro-founded and allows for rich consumer heterogeneity to generate flexible substitution patterns between products. The supply side specifies marginal costs and accounts for imperfect competition. Our analysis focuses on two main questions. First, how has the framework been tailored to specific situations and how convincingly has it been evaluated to generate trust in the empirical findings and policy conclusions? Second, what has been learned about policy issues relevant in the automotive industry using the BLP equilibrium framework?

We propose a methodology for estimating the competition effects from entry when firms sell differentiated products. We first derive precise conditions under which Bresnahan and Reiss’s entry threshold ratios (ETRs) can be used to measure competition effects. We then augment the traditional entry model with a revenue equation. This serves to adjust the ETRs by the extent of market expansion from entry, giving unbiased estimates of the competition effects. We apply our approach to seven local service sectors. We find that entry typically leads to significant market expansion, implying that traditional ETRs may substantially underestimate the competition effects from entry.

Using a rich personnel data set of a large European university we find strong evidence for the existence of an internal labor market. First, there is a strong port of entry at the lowest academic rank and in fact even prior to entering professorship, resulting in very long internal careers. Second, wages do not follow external wage developments. We subsequently consider various incentive theories regarding the dynamics of promotions, as organized through annual tournaments. As expected, a rigid set of research and teaching criteria determine the speed of promotions. At the same time, administrative rigidities play an important role.

We study a generous program to promote the adoption of solar photovoltaic (PV) systems through subsidies on future electricity production, rather than through upfront investment subsidies. We develop a tractable dynamic model of new technology adoption, also accounting for local market heterogeneity. We identify the discount factor from demand responses to variation that shifts expected future but not current utilities. Despite the massive adoption, we find that households significantly discounted the future benefits from the new technology. This implies that an upfront investment subsidy program would have promoted the technology at a much lower budgetary cost.

Exclusive dealing contracts between manufacturers and retailers force new entrants to set up their own costly dealer networks to enter the market. We ask whether such contracts may act as an entry barrier, and provide an empirical analysis of the European car market. We first estimate a demand model with product and spatial differentiation, and quantify consumers' valuations for dealer proximity and dealer exclusivity. We then perform policy counterfactuals to assess the profit incentives and possible entry-deterring effects of exclusive dealing. We find that there are no unilateral incentives to maintain exclusive dealing, but there is a collective incentive for the industry as a whole. Furthermore, a ban on exclusive dealing would raise the smaller entrants' market share. But more importantly, consumers would gain, not so much because of increased price competition, but rather because of the increased spatial availability, which compensates for the demand inefficiency from a loss of dealer exclusivity.

We propose a random coefficients nested logit (RCNL) model to compare the tractable nested logit (NL) model with the more complex random coefficients logit (RC) model. After a simulation study, we use data on the European automobile market. Both the NL and RC models are rejected against the RCNL model. The RC model results in different substitution patterns and a wider market definition than the NL and RCNL models. Nevertheless, the predicted price effects from mergers are robust across models. Our findings stress the importance of accounting for discrete sources of market segmentation not captured by continuous product characteristics.

We study entry restrictions in a private monopoly: the Latin notary system. Under this widespread system, the state grants notaries exclusive rights to certify important economic transactions, including real estate. To uncover the current policy goals behind the geographic entry restrictions, we develop an empirical entry model that incorporates a spatial demand model and a multioutput production model. We find that the entry restrictions serve primarily producer interests and give only a small weight to consumer surplus. We show how reform would generate considerable welfare improvements and imply a substantial redistribution toward consumers without threatening geographic coverage.

We extend BLP's aggregate discrete-choice model of product differentiation to create more flexibility in the price functional form. We apply a Box-Cox specification, which relaxes the typical unit demand assumption and creates flexibility on demand curvature. The model provides a unifying framework for mixed logit and mixed CES models, while remaining computationally tractable. We provide an illustrative application to the ready-to-eat cereals market. This shows that the cross-sectional relation between price elasticities and average prices per product is more in line with descriptive elasticity patterns, and that substitution between product pairs may be affected to some extent.

We study a major new entry in the French mobile telecommunications market, followed by the introduction of fighting brands by the three incumbents. Using an empirical oligopoly model, we find that the incumbents’ fighting brand strategies are difficult to rationalize as unilateral best responses. Instead, their strategies are consistent with a breakdown of tacit semi-collusion: before entry, the incumbents could successfully coordinate on restricting product variety to avoid cannibalization; after entry, this outcome became harder to sustain because of increased business stealing incentives. Consumers gained considerably from the added variety and, to a lesser extent, from the incumbents’ price responses.

The success of new technologies depends on both the firms' investment and consumers' usage decisions. We study this problem in a shared ATM network. Inefficiencies may arise because banks coordinate investment, and consumers may not make proper use of the network. Based on an empirical model of ATM investment and demand, we find that banks substantially underinvested in ATMs, in contrast with earlier findings of strategic overinvestment in the United States. Furthermore, ATM usage was too low, because regulation prohibited fees for cash withdrawals. A direct promotion of investment improves welfare, but fees for branch cash withdrawals would be more effective.