Chapter 5 Application

From practitioner’s perspective, the difficulty of elasticity calculation primarily lies on availability of household-level data. Unless data is sourced from a well-designed survey as in AC Nielsen homescan study, aggregated data is the only source for elasticity calculation. Then, the question is whether it is true to apply the AIDS model to aggregated data while knowing that we reject the homogeneity and symmetry restrictions.

There are many papers applied the AIDS model in the context of household level data as well as on aggregated data. An estimate from this model using an aggregated industry data should be validated, at least using household level data if there is available.