Year: 2025
Type: report
Abstract: We develop a new approach to estimating flexible demand models with exogenous supply-side shocks.Our approach avoids conventional assumptions of exogenous product characteristics, putting no restrictions on product entry, despite using instrumental variables that incorporate characteristic variation.The proposed instruments are model-predicted responses of endogenous variables to the exogenous shocks, recentered to avoid bias from endogenous characteristics.We illustrate the approach in a series of Monte Carlo simulations.
Authors: Borusyak, Kirill, Bravo, Mauricio Caceres, Hull, Peter
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: gold
OpenAlex ID: W4409213843