Non-Parametric Demand Analysis with an Application to the Demand for Fish

49 Pages Posted: 20 May 2005 Last revised: 29 Jun 2010

See all articles by Joshua D. Angrist

Joshua D. Angrist

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Kathryn Graddy

Brandeis University - Department of Economics

Guido W. Imbens

Stanford Graduate School of Business

Date Written: April 1995

Abstract

Instrumental variables (IV) estimation of a demand equation using time series data is shown to produce a weighted average derivative of heterogeneous potential demand functions. This result adapts recent work on the causal interpretation of two-stage least squares estimates to the simultaneous equations context and generalizes earlier research on average derivative estimation to models with endogenous regressors. The paper also shows how to compute the weights underlying IV estimates of average derivatives in a simultaneous equations model. These ideas are illustrated using data from the Fulton Fish market in New York City to estimate an average elasticity of wholesale demand for fresh fish. The weighting function underlying IV estimates of the demand equation is graphed and interpreted. The empirical example illustrates the essentially local and context-specific nature of instrumental variables estimates of structural parameters in simultaneous equations models.

Suggested Citation

Angrist, Joshua and Graddy, Kathryn and Imbens, Guido W., Non-Parametric Demand Analysis with an Application to the Demand for Fish (April 1995). NBER Working Paper No. t0178. Available at SSRN: https://ssrn.com/abstract=225088

Joshua Angrist (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Kathryn Graddy

Brandeis University - Department of Economics ( email )

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HOME PAGE: http://people.brandeis.edu/~kgraddy/

Guido W. Imbens

Stanford Graduate School of Business ( email )

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Stanford, CA 94305-5015
United States

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