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Foundations of Demand Estimation

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  • 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
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    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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