Instrument-free Identification and Estimation of Differentiated Products Models

David Byrne, Susumu Imai, Vasilis Sarafidis and Masayuki Hirukawa

No 274662, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: We propose a new methodology for estimating the demand and cost functions of dierentiated products models when demand and cost data are available. The method deals with the endogeneity of prices to demand shocks and the endogeneity of outputs to cost shocks, but does not require instruments for identication. We establish non-parametric identication, consistency and asymptotic normality of our estimator. Using Monte-Carlo experiments, we show our method works well in contexts where instruments are correlated with demand and cost shocks, and where commonly-used instrumental variables estimators are biased and numerically unstable.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 74
Date: 2015-01
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https://ageconsearch.umn.edu/record/274662/files/qed_wp_1336.pdf (application/pdf)

Related works:
Working Paper: Instrument-free Identifcation and Estimation of the Diferentiated Products Models (2015)
Working Paper: Instrument-free Identification And Estimation Of Differentiated Products Models (2015)
Working Paper: Instrument-free Identification and Estimation of Differentiated Products Models (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:274662

DOI: 10.22004/ag.econ.274662

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