Identifying Demand with Multidimensional Unobservables: A Random Functions Approach

Jeremy T. Fox, Amit Gandhi

NBER Working Paper No. 17557
Issued in November 2011
NBER Program(s):   IO   TWP

We explore the identification of nonseparable models without relying on the property that the model can be inverted in the econometric unobservables. In particular, we allow for infinite dimensional unobservables. In the context of a demand system, this allows each product to have multiple unobservables. We identify the distribution of demand both unconditional and conditional on market observables, which allows us to identify several quantities of economic interest such as the (conditional and unconditional) distributions of elasticities and the distribution of price effects following a merger. Our approach is based on a significant generalization of the linear in random coefficients model that only restricts the random functions to be analytic in the endogenous variables, which is satisfied by several standard demand models used in practice. We assume an (unknown) countable support for the the distribution of the infinite dimensional unobservables.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17557

Users who downloaded this paper also downloaded these:
Carlin and Ederer w17895 Search Fatigue
Fox and Kim w17283 A Simple Nonparametric Approach to Estimating the Distribution of Random Coefficients in Structural Models
Opler, Pinkowitz, Stulz, and Williamson w6234 The Determinants and Implications of Corporate Cash Holdings
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us