A multinomial logit model was estimated for consumer choice between Coke , Pepsi, and 7up at a supermarket store as a function of their prices. The model is estimated on only consumers that chose one of these three brands.

The estimated general utility equation for this model is as follows:

The utility FeatHeinz = 1 if Heinz used feature advertising on that choice occasion, = 0 otherwise

From choosing drink. j { Coke , Pepsi, 7UP} IS :

V(j) = 2.1 I(pepsi) - 0.37 I (7up) - 1.25 Price j

Where Price(j) is the price (in usd) of soda alternative j

I(pepsi) is an indicator variable alternative j being Pepsi

I(7up) is an indicator variable alternative j being 7UP

1. If all three sodas were sold at the same price , which soda would have the highest market share ? and why?
2. If the prices of Coke, Pepsi and 7up are : $2.50 to $3.00 aand $2.25, respectively then what are the predicted market shares for each soda? Show all calculations.
3. If the price of coke decreased from $2.50 to $2.00 which brand loses the most market share ? The prices for pepsi and 7up are unchanged at $3.00 and $2.25respectively . Show all calculations.