Nonparametric Identification of Demand without Exogenous Product Characteristics
Fuente:
arXiv
Saved in:
| Main Authors: | , , , |
|---|---|
| Format: | Preprint |
| Published: |
2025
|
| Subjects: | |
| Online Access: | |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1866912915865468928 |
|---|---|
| author | Borusyak, Kirill Chen, Jiafeng Hull, Peter Lei, Lihua |
| author_facet | Borusyak, Kirill Chen, Jiafeng Hull, Peter Lei, Lihua |
| contents | We study identification of differentiated product demand from market-level data when product characteristics can be endogenous. Past work suggests nonparametric identification may be impossible: that is, in addition to standard price instruments, exogenous characteristic-based instruments are essentially necessary to identify sufficiently flexible demand models with standard index restrictions. We show, however, that price counterfactuals are nonparametrically identified using recentered instruments -- which combine exogenous price instruments with possibly endogenous product characteristics -- under a weaker index restriction and a new condition we term faithfulness. We argue that faithfulness, like the usual completeness condition for nonparametric instrumental variable identification, is best viewed as a technical requirement on the strength of identifying variation rather than a substantive economic or statistical restriction. We show the two conditions are closely related, though generally distinct. We conclude with several practical implications for the parametric estimation of demand counterfactuals. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2512_23211 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Nonparametric Identification of Demand without Exogenous Product Characteristics Borusyak, Kirill Chen, Jiafeng Hull, Peter Lei, Lihua Econometrics Statistics Theory Methodology We study identification of differentiated product demand from market-level data when product characteristics can be endogenous. Past work suggests nonparametric identification may be impossible: that is, in addition to standard price instruments, exogenous characteristic-based instruments are essentially necessary to identify sufficiently flexible demand models with standard index restrictions. We show, however, that price counterfactuals are nonparametrically identified using recentered instruments -- which combine exogenous price instruments with possibly endogenous product characteristics -- under a weaker index restriction and a new condition we term faithfulness. We argue that faithfulness, like the usual completeness condition for nonparametric instrumental variable identification, is best viewed as a technical requirement on the strength of identifying variation rather than a substantive economic or statistical restriction. We show the two conditions are closely related, though generally distinct. We conclude with several practical implications for the parametric estimation of demand counterfactuals. |
| title | Nonparametric Identification of Demand without Exogenous Product Characteristics |
| topic | Econometrics Statistics Theory Methodology |
| url | https://arxiv.org/abs/2512.23211 |