Estimating Models of Supply and Demand: Instruments and Covariance Restrictions

• 成果类型: Article
• 署名作者: Mackay, Alexander; Miller, Nathan h.
• 署名单位: University of Virginia; Georgetown University
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.20230024
• 发表日期: 2025
• 页码: 238-281
• 关键词: oligopoly solution concept; identification; Identifiability; prices; EQUATIONS; guide

摘要

We consider the identification of empirical models of supply and demand with imperfect competition. We show that a restriction on the covariance between unobserved demand and cost shocks can resolve endogeneity and identify the price parameter. We demonstrate how to employ this approach in estimation, and we compare it to the method of instrumental variables. Our formal results also indicate that weaker covariance restrictions can bound the price parameter. We illustrate the covariance restriction approach with applications to ready-to-eat cereal, cement, and airlines.