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Structural Estimation Of The Model Of Firm Experimentation

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Executive Summary

The authors present the structural estimation of the model of firm experimentation of Akhmetova (2010). They make the following empirical interpretation of the model. They assume that a firm can learn about the demand for its good by observing its exports of individual subcategories of the good. That is, sales of individual 8-digit products within a given 4-digit category (according to the ComTrade classification) can provide information about the demand for that 4-digit good. They estimate the model in this formulation using the French firm level export data, and infer the values of testing costs and sunk cost of entry, as well as the parameters characterizing demand uncertainty, for various 4-digit sectors and destinations.

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