imprint:
Cambridge, Mass: National Bureau of Economic Research, May 2013
Published in:NBER working paper series ; no. w19011
Extent:
1 Online-Ressource
Language:
English
DOI:
10.3386/w19011
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
Mode of access: World Wide Web
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Description:
We develop simple tests for endogenous prices arising from omitted demand factors in discrete choice models. Our approach only requires one to locate testing proxies that have some correlation with the omitted factors when prices are endogenous. We use the difference between prices and their predicted values given observed demand and supply factors. If prices are exogenous, these proxies should not explain demand given prices and other explanatory variables. We reject exogeneity if these proxies enter significantly in utility as additional explanatory variables. The tests are easy to implement as we show with several Monte Carlos and discuss for three recent demand applications