L15: Demand Estimation I

Question 1

why is estimating demand important

Answer 1

learning about consumer preferences

estimating degree of market power

studying counterfactuals

Question 2

challenges of demand estimation

Answer 2

prices are endogenous
- characteristics of the goods that we don’t observe (underlying OVB)
- prices with more desirable unobserved characteristics have higher prices
- need instruments

demand for a given good depends on the prices and characteristics of all related goods
- demand depends on the unobserved characteristics of other goods