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Foundations of Demand Estimation

Author

Listed:
  • Steven T. Berry
  • Philip A. Haile

Abstract

Demand elasticities and other features of demand are critical determinants of the answers to most positive and normative questions about market power or the functioning of markets in practice. As a result, reliable demand estimation is an essential input to many types of research in Industrial Organization and other fields of economics. This chapter presents a discussion of some foundational issues in demand estimation. We focus on the distinctive challenges of demand estimation and strategies one can use to overcome them. We cover core models, alternative data settings, common estimation approaches, the role and choice of instruments, and nonparametric identification.

Suggested Citation

  • Steven T. Berry & Philip A. Haile, 2021. "Foundations of Demand Estimation," NBER Working Papers 29305, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29305
    Note: IO
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    Cited by:

    1. Sesmero, Juan Pablo & Balagtas, Joseph V. & Wu, Steven Y. & Albert Scott, Francisco, 2023. "Out-of-Equilibrium Behavior and Inference on Firm Conduct Evidence from Laboratory Experiments," 2023 Annual Meeting, July 23-25, Washington D.C. 335854, Agricultural and Applied Economics Association.
    2. Gianluca Antonecchia & Ajay Bhaskarabhatla, 2023. "How firms compete when they set identical prices: Nonprice strategies in the Indian biscuit industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(4), pages 733-756, October.
    3. Lei Lu & Jianxing Wei & Weixing Wu & Yi Zhou, 2023. "Pricing strategies in BigTech lending: Evidence from China," Financial Management, Financial Management Association International, vol. 52(2), pages 333-374, June.
    4. Miller, Nathan H., 2025. "Industrial organization and The Rise of Market Power," International Journal of Industrial Organization, Elsevier, vol. 98(C).
    5. Aaron L. Bodoh-Creed & Brent R. Hickman & John A. List & Ian Muir & Gregory K. Sun, 2023. "Stress Testing Structural Models of Unobserved Heterogeneity: Robust Inference on Optimal Nonlinear Pricing," NBER Working Papers 31647, National Bureau of Economic Research, Inc.
    6. O'Connell, Martin & Smith, Howard & Thomassen, Oyvind, 2023. "A two sample size estimator for large data sets," CEPR Discussion Papers 17941, C.E.P.R. Discussion Papers.
    7. Bhattacharya, Debopam, 2025. "Integrability and identification in multinomial choice models," Journal of Economic Theory, Elsevier, vol. 223(C).
    8. Jacek Białek & Natalia Pawelec & Sylwia Roszkowska, 2024. "Estimating the elasticity of substitution when compiling the CES cost of living index on scanner data," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(6), pages 5997-6021, December.
    9. Flynn, Joel P. & Sastry, Karthik A., 2023. "Strategic mistakes," Journal of Economic Theory, Elsevier, vol. 212(C).
    10. Pédussel Wu, Jennifer & Metzger, Martina & Neira, Ignacio Silva & Farroukh, Arafet, 2023. "What determines demand for digital community currencies? OurVillage in Cameroon," IPE Working Papers 209/2023, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    11. Aimene, Louise & Guiffard, Jean-Baptiste & Ivaldi, Marc & Liang, Julienne, 2023. "Welfare Cost of Mobile Spectrum (Mis)allocation," CEPR Discussion Papers 18016, C.E.P.R. Discussion Papers.
    12. Nicolas Lagios & Pierre-Guillaume Méon, 2023. "A Matter of Taste: The Negative Welfare Effect of Expert Judgments," Working Papers CEB 23-009, ULB -- Universite Libre de Bruxelles.
    13. repec:ags:aaea22:335854 is not listed on IDEAS
    14. Mayer, Thierry & Head, Keith, 2021. "Poor Substitutes? Counterfactual methods in IO and Trade compared," CEPR Discussion Papers 16762, C.E.P.R. Discussion Papers.
    15. Mansley, Ryan & Miller, Nathan H. & Sheu, Gloria & Weinberg, Matthew C., 2023. "A price leadership model for merger analysis," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    16. Enache, Andreea & Friberg, Richard & Wiklander, Magnus, 2023. "Demand for in-app purchases in mobile apps—A difference-in-difference approach," International Journal of Industrial Organization, Elsevier, vol. 88(C).
    17. Atsushi Iimi, 2023. "Estimating the demand for informal public transport: evidence from Antananarivo, Madagascar," Public Transport, Springer, vol. 15(1), pages 129-168, March.
    18. Dean Hyslop & Trinh Le & David C. Maré & Lynn Riggs & Nic Watson, 2023. "Domestic transport charges: Estimation of transport-related elasticities," Motu Working Papers 23_10, Motu Economic and Public Policy Research.

    More about this item

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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