Reinterpreting demand estimation

Jiafeng Chen

Papers from arXiv.org

Abstract: This paper bridges the demand estimation and causal inference literatures by interpreting nonparametric structural assumptions as restrictions on counterfactual outcomes. It offers nontrivial and equivalent restatements of key demand estimation assumptions in the Neyman-Rubin potential outcomes model, for both settings with market-level data (Berry and Haile, 2014) and settings with demographic-specific market shares (Berry and Haile, 2024). The reformulation highlights a latent homogeneity assumption underlying structural demand models: The relationship between counterfactual outcomes is assumed to be identical across markets. This assumption is strong, but necessary for identification of market-level counterfactuals. Viewing structural demand models as misspecified but approximately correct reveals a tradeoff between specification flexibility and robustness to latent homogeneity.

Date: 2025-03, Revised 2025-07
New Economics Papers: this item is included in nep-ecm
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