Common Sense and Simplicity in Empirical Industrial Organization

34 Pages Posted: 2 Dec 2003

See all articles by Ariel Pakes

Ariel Pakes

National Bureau of Economic Research (NBER); Harvard University - Department of Economics

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Date Written: December 2003

Abstract

This paper is a revised version of a keynote address delivered at the inaugural International Industrial Organization Conference in Boston, April 2003. I argue that new econometric tools have facilitated the estimation of models with realistic theoretical underpinnings, and because of this, have made empirical I.O. much more useful. The tools solve computational problems thereby allowing us to make the relationship between the economic model and the estimating equations transparent. This, in turn, enables us to utilize the available data more effectively. It also facilitates robustness analysis and clarifies the assumptions needed to analyze the causes of past events and/or make predictions of the likely impacts of future policy or environmental changes. The paper provides examples illustrating the value of simulation for the estimation of demand systems and of semiparametrics for the estimation of entry models.

Suggested Citation

Pakes, Ariel, Common Sense and Simplicity in Empirical Industrial Organization (December 2003). Harvard Economic Research Discussion Paper No. 2022. Available at SSRN: https://ssrn.com/abstract=475180 or http://dx.doi.org/10.2139/ssrn.475180

Ariel Pakes (Contact Author)

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Harvard University - Department of Economics ( email )

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