This paper compares the inverse product differentiation logit (IPDL) model with popular additive random utility models (ARUMs): the multinomial logit (MNL), nested logit (NL) and random coefficients logit (RCL), using detailed data from Denmark’s new-car market. The IPDL, estimable by linear instrumental variables and permitting overlapping nests, offers a tractable non-ARUM alternative. We find that (1) IPDL captures substitution concentrated within discrete segments, while the RCL allows broader cross-segment substitution; (2) IPDL implies strictly log-concave demand and under-shifted pass-through, whereas RCL accommodates richer curvature; (3) IPDL’s overlapping nests improve robustness and computational efficiency relative to hierarchical nesting structures; (4) RCL best predicts post-reform outcomes from Denmark’s 2018 registration-tax reform; and (5) model choice materially affects results of policy evaluations; IPDL predicts smaller fiscal and compositional shifts than RCL. Consequently, IPDL provides a practical yet constrained alternative to ARUM-based models, delivering tractability at some cost to behavioral realism.

This paper examines how productivity and overall performance of exporters are affected when they start supplying a foreign “superstar firm”. Using comprehensive register data on firm-to-firm trade between Denmark and Sweden and a dynamic event study design, we find that suppliers that begin exporting to a superstar firm experience a 4.6% increase in employment and a 7.3% rise in total factor productivity. Our analysis further reveals that these effects are not merely the result of acquiring a new large trading partner but are specifically tied to the characteristics of superstar firms. We validate our findings through robustness checks, including placebo tests, which confirm that firms gaining non-superstar buyers do not exhibit similar productivity gains. These insights contribute to the broader literature on international trade and firm productivity, demonstrating how buyer-supplier linkages drive productivity spillovers and knowledge diffusion across borders.

How do primary and secondary markets interact? We propose a structural model of car choice by forward-looking consumers that features endogenous price equilibrium for both new and used cars. We estimate the model using Danish register data and conduct two counterfactual exercises to study how the primary and secondary markets interact: First, we simulate the effects of rising marginal costs and second, a hypothetical merger between the two largest car manufacturers. We derive two main findings: First, we show that an active secondary market in equilibrium leads to more market power since firms internalize that secondary market prices respond to prices in the primary market. Therefore, by not explicitly modeling the secondary market in durable goods industries, researchers would be led to underestimate market power and for example the competitive harm from mergers. Second, we characterize how a dynamic model allows for substantially more flexible substitution patterns than a static model.