TY  - JOUR
AU  - Berry,Steven T.
AU  - Haile,Philip A.
TI  - Identification in Differentiated Products Markets Using Market Level Data
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15641
PY  - 2010
Y2  - January 2010
UR  - http://www.nber.org/papers/w15641
L1  - http://www.nber.org/papers/w15641.pdf
N1  - Author contact info:
Steven T. Berry
Yale University Department of Economics
Box 208264
37 Hillhouse Avenue
New Haven, CT 06520-8264
Tel: 203/432-3556
Fax: 203/432-6323
E-Mail: steven.berry@yale.edu

Philip Haile
Department of Economics
Yale University
37 Hillhouse Avenue
P.O. Box 208264
New Haven, CT  06520
Tel: 203/432-3568
Fax: 203/432-6323
E-Mail: philip.haile@yale.edu
AB  - We consider nonparametric identification in models of differentiated products markets, using only market level observables. On the demand side we consider a nonparametric random utility model nesting random coefficients discrete choice models widely used in applied work. We allow for product/market-specific unobservables, endogenous product characteristics (e.g., prices), and high-dimensional taste shocks with arbitrary correlation and heteroskedasticity. On the supply side we specify marginal costs nonparametrically, allow for unobserved firm heterogeneity, and nest a variety of equilibrium oligopoly models. We pursue two approaches to identification. One relies on instrumental variables conditions used previously to demonstrate identification in a nonparametric regression framework. With this approach we can show identification of the demand side without reference to a particular supply model. Adding the supply side allows identification of firms' marginal costs as well. Our second approach, more closely linked to classical identification arguments for supply and demand models, employs a change of variables approach. This leads to constructive identification results relying on exclusion and support conditions. Our results lead to a testable restriction that provides the first general formalization of Bresnahan's (1982) intuition for empirically discriminating between alternative models of oligopoly competition.
ER  -