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Reinterpreting demand estimation

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  • Jiafeng Chen

Abstract

This paper clarifies how and why structural demand models (Berry and Haile, 2014, 2024) predict unit-level counterfactual outcomes. We do so by casting structural assumptions equivalently as restrictions on the joint distribution of potential outcomes. Our reformulation highlights a counterfactual homogeneity assumption underlying structural demand models: The relationship between counterfactual outcomes is assumed to be identical across markets. This assumption is strong, but cannot be relaxed without sacrificing identification of market-level counterfactuals. Absent this assumption, we can interpret model-based predictions as extrapolations from certain causally identified average treatment effects. This reinterpretation provides a conceptual bridge between structural modeling and causal inference.

Suggested Citation

  • Jiafeng Chen, 2025. "Reinterpreting demand estimation," Papers 2503.23524, arXiv.org, revised Nov 2025.
    • Handle: RePEc:arx:papers:2503.23524
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    References listed on IDEAS

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    1. James J. Heckman, 1976. "Introduction to "Annals of Economic and Social Measurement, Volume 5, number 4"," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, National Bureau of Economic Research, Inc.
    2. Steven T. Berry & Philip A. Haile, 2024. "Nonparametric Identification of Differentiated Products Demand Using Micro Data," Econometrica, Econometric Society, vol. 92(4), pages 1135-1162, July.
    3. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    4. Atı̇la Abdulkadı̇roğlu & Joshua D. Angrist & Yusuke Narita & Parag Pathak, 2022. "Breaking Ties: Regression Discontinuity Design Meets Market Design," Econometrica, Econometric Society, vol. 90(1), pages 117-151, January.
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    Cited by:

    1. Kirill Borusyak & Jiafeng Chen & Peter Hull & Lihua Lei, 2025. "Nonparametric Identification of Demand without Exogenous Product Characteristics," Papers 2512.23211, arXiv.org, revised Feb 2026.

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