The Proportionally-Calibrated Almost Ideal Demand System (PCAIDS) is an extension of the AIDS model. It is based on the "proposition of proportionality": a price increase of a single product leads to a shift of demand to other products. This demand shift is proportional to market shares.

 

One advantage of the PCAIDS model is that the calculation involves only a small number of parameters. It requires market share information and two other parameters: the industry price elasticity and the price elasticity for the respective products in the market. Given these parameters the own-price elasticities and the cross-price elasticities of the representative products in the market can be derived.

 

As with logit models, the PCAIDS model can be extended to include a nested structure which loosens the proportionality assumption between groups of brands.

 

The upside of this model is its ease of use and the low number of parameters to be estimated.

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