Instrument-free identification and estimation of differentiated products models using cost data
利用成本数据识别和估计差异化产品模型：无需工具变量的方法
We propose a new methodology for identifying and estimating demand in differentiated products models when demand and cost data are available. The method deals with the endogeneity of prices to demand shocks and the endogeneity of outputs to cost shocks by using cost data rather than instruments. Further, we allow for unobserved market size. Using Monte Carlo experiments, we show that our method works well in contexts where commonly used instruments are invalid. We also apply…