Fast, "Robust", and Approximately Correct: Estimating Mixed Demand Systems

Bernard Salanié and Frank A. Wolak

No 25726, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many econometric models used in applied work integrate over unobserved heterogeneity. We show that a class of these models that includes many random coefficients demand systems can be approximated by a “small-σ” expansion that yields a linear two-stage least squares estimator. We study in detail the models of product market shares and prices popular in empirical IO. Our estimator is only approximately correct, but it performs very well in practice. It is extremely fast and easy to implement, and it is “robust” to changes in the higher moments of the distribution of the random coefficients. At the very least, it provides excellent starting values for more commonly used estimators of these models.

JEL-codes: L00 L13 (search for similar items in EconPapers)
Date: 2019-04
Note: EEE IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Fast, "robust", and approximately correct: estimating mixed demand systems (2018)
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