Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Demand Estimation in Models of Imperfect Competition
    26 Nov 2018Working Paper Summaries

    Demand Estimation in Models of Imperfect Competition

    by Alexander MacKay and Nathan H. Miller
    The study shows how knowledge about firm behavior can be modeled to better predict demand. Firms tend to raise prices in response to higher demand, so observed relationships between price and quantity can be quite misleading. The authors provide an adjustment that can be used when price experiments or instrumental variables are not available.
    LinkedIn
    Email

    Author Abstract

    We consider the identification and estimation of demand systems in models of imperfect competition. Under standard assumptions about demand and supply, the bias that arises from price endogeneity can be resolved without the use of instruments. We provide a constructive identification result where the causal price parameter can be expressed as a function of the covariance of unobserved shocks. The function is estimated efficiently by the output of ordinary least squares regression. Thus, with a covariance restriction on unobservable shocks, structural parameters can be point identified. Further, it can be possible to place bounds on the structural parameters without imposing a covariance restriction. We illustrate the methodology with applications to ready-to-eat cereal, cement, and airlines.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: October 2018
    • HBS Working Paper Number: HBS Working Paper #19-051
    • Faculty Unit(s): Strategy
      Trending
        • 25 Jan 2022
        • Research & Ideas

        More Proof That Money Can Buy Happiness (or a Life with Less Stress)

        • 25 Feb 2019
        • Research & Ideas

        How Gender Stereotypes Kill a Woman’s Self-Confidence

        • 14 Mar 2023
        • In Practice

        What Does the Failure of Silicon Valley Bank Say About the State of Finance?

        • 17 May 2017
        • Research & Ideas

        Minorities Who 'Whiten' Job Resumes Get More Interviews

        • 15 Nov 2022
        • Book

        Stop Ignoring Bad Behavior: 6 Tips for Better Ethics at Work

    Alexander J. MacKay
    Alexander J. MacKay
    Assistant Professor of Business Administration
    Contact
    Send an email
    → More Articles
    Find Related Articles
    • Forecasting and Prediction
    • Demand and Consumers
    • Marketing Strategy

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College