Identification In Differentiated Products Markets Using Market Level Data
The authors consider nonparametric identification in models of differentiated products markets, using only market level observables. On the demand side they consider a nonparametric random utility model nesting random coefficients discrete choice models widely used in applied work. They allow for product/market-specific unobservable, endogenous product characteristics, and high-dimensional taste shocks with arbitrary correlation and heteroskedasticity. On the supply side they specify marginal costs nonparametrically, allow for unobserved firm heterogeneity, and nest a variety of equilibrium oligopoly models. They pursue two approaches to identification.