E-Commerce

Identification In Differentiated Products Markets Using Market Level Data

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Executive Summary

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.

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