Estimating Demand with Recentered Instruments
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arXiv
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| Main Authors: | , , |
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| Format: | Preprint |
| Published: |
2025
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| _version_ | 1866912311083532288 |
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| author | Borusyak, Kirill Bravo, Mauricio Caceres Hull, Peter |
| author_facet | Borusyak, Kirill Bravo, Mauricio Caceres Hull, Peter |
| contents | We develop a new approach to estimating flexible demand models with exogenous supply-side shocks. Our approach avoids conventional assumptions of exogenous product characteristics, putting no restrictions on product entry, despite using instrumental variables that incorporate characteristic variation. The proposed instruments are model-predicted responses of endogenous variables to the exogenous shocks, recentered to avoid bias from endogenous characteristics. We illustrate the approach in a series of Monte Carlo simulations. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2504_04056 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Estimating Demand with Recentered Instruments Borusyak, Kirill Bravo, Mauricio Caceres Hull, Peter Econometrics We develop a new approach to estimating flexible demand models with exogenous supply-side shocks. Our approach avoids conventional assumptions of exogenous product characteristics, putting no restrictions on product entry, despite using instrumental variables that incorporate characteristic variation. The proposed instruments are model-predicted responses of endogenous variables to the exogenous shocks, recentered to avoid bias from endogenous characteristics. We illustrate the approach in a series of Monte Carlo simulations. |
| title | Estimating Demand with Recentered Instruments |
| topic | Econometrics |
| url | https://arxiv.org/abs/2504.04056 |