Estimation of a Heterogeneous Demand Function with Berkson Errors

Séminaire d’économétrie de Montréal 2022-2023
conjoint avec les départements d’économique des universités de Montréal, du Québec à Montréal, Concordia et McGill ainsi que le CIRANO

salle Leacock 429 (McGill University, 855, rue Sherbrooke Ouest)

Responsables : Marine Carrasco (U. de Montréal) et Saraswata Chaudhuri (McGill U.)

Hôte: R. Davidson Lecture Fund à McGill University

---

 
RÉSUMÉ : Berkson errors are commonplace in empirical microeconomics. In consumer demand, this form of measurement error occurs when the price an individual pays is measured by the (weighted) average price paid by individuals in a group (e.g., a county) rather than the true transaction price. We show the importance of Berkson errors for demand estimation with nonseparable unobserved heterogeneity. We develop a consistent estimator using external information on the true price distribution. Examining gasoline demand in the United States, we document substantial within-market price variability. Accounting for Berkson errors is quantitatively important. Imposing the Slutsky shape constraint reduces sensitivity to Berkson errors.