Nonparametric Identification of Demand without Exogenous Product Characteristics

Kirill Borusyak, Jiafeng Chen, Peter Hull and Lihua Lei

No 34842, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study identification of differentiated product demand from market-level data when product characteristics can be endogenous. Past work suggests nonparametric identification may be impossible: that is, in addition to standard price instruments, exogenous characteristic-based instruments are essentially necessary to identify sufficiently flexible demand models with standard index restrictions. We show, however, that price counterfactuals are nonparametrically identified using recentered instruments—which combine exogenous price instruments with possibly endogenous product characteristics—under a weaker index restriction and a new condition we term faithfulness. We argue that faithfulness, like the usual completeness condition for nonparametric instrumental variable identification, is best viewed as a technical requirement on the strength of identifying variation rather than a substantive economic or statistical restriction. We show the two conditions are closely related, though generally distinct. We conclude with several practical implications for the parametric estimation of demand counterfactuals.

JEL-codes: C14 C36 L13 (search for similar items in EconPapers)
Date: 2026-02
New Economics Papers: this item is included in nep-com
Note: IO LS TWP
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w34842.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
Working Paper: Nonparametric Identification of Demand without Exogenous Product Characteristics (2026)
Working Paper: Nonparametric identification of demand without exogenous product characteristics (2026)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:34842

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w34842
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().