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Ulric B. and Evelyn L. Bray Social Sciences Seminar

Tuesday, October 22, 2019
4:00pm to 5:00pm
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Baxter B125
Fast, "Robust", and Approximately Correct: Estimating Mixed Demand Systems
Bernard Salanie, Professor and Chair, Department of Economics, Columbia University,

Abstract: Many econometric models used in applied work integrate over unobserved heterogeneity. We show that a class of these models that includes many random coefficients demand systems can be approximated by a "small-σ" expansion that yields a linear two-stage least squares estimator. We study in detail the models of product market shares and prices popular in empirical IO. Our estimator is only approximately correct, but it performs very well in practice. It is extremely fast and easy to implement, and it is "robust" to changes in the higher moments of the distribution of the random coefficients. At the very least, it provides excellent starting values for more commonly used estimators of these models.

For more information, please contact Letty Diaz by phone at 626-395-1255 or by email at letty.diaz@caltech.edu.