Identification in Differentiated Products Markets

37 Pages Posted: 19 Aug 2015

See all articles by Steven Berry

Steven Berry

Yale University - Department of Economics; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Philip A. Haile

Yale University - Department of Economics; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

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Date Written: August 18, 2015

Abstract

Empirical models of demand for -- and, often, supply of -- differentiated products are widely used in practice, typically employing parametric functional forms and distributions of consumer heterogeneity. We review some recent work studying identification in a broad class of such models. This work shows that parametric functional forms and distributional assumptions are not essential for identification. Rather, identification relies primarily on the standard requirement that instruments be available for the endogenous variables -- here, typically, prices and quantities. We discuss the kinds of instruments needed for identification and how the reliance on instruments can be reduced by nonparametric functional form restrictions or better data. We also discuss results on discrimination between alternative models of oligopoly competition.

Keywords: Nonparametric identification, Instrumental variables, Discrete choice, Differentiated products oligopoly, Demand and supply, Firm conduct

JEL Classification: C3, D12, D22, D4, L1

Suggested Citation

Berry, Steven T. and Haile, Philip A., Identification in Differentiated Products Markets (August 18, 2015). Cowles Foundation Discussion Paper No. 2019, Available at SSRN: https://ssrn.com/abstract=2646589 or http://dx.doi.org/10.2139/ssrn.2646589

Steven T. Berry

Yale University - Department of Economics ( email )

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New Haven, CT 06520-8264
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Philip A. Haile (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8264
United States
203-432-3568 (Phone)
203-432-6323 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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