Abstract
—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 in-dividuals 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.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 877-889 |
| Number of pages | 13 |
| Journal | Review of Economics and Statistics |
| Volume | 104 |
| Issue number | 5 |
| DOIs | |
| State | Published - Sep 2022 |
Funding
We are grateful to the editor, Bryan Graham, and two referees for helpful comments. We thank seminar participants at the Heterogeneity in Supply and Demand conference at Boston College and the Bristol Econometric Study Group Annual Conference for helpful comments. We are grateful to Agnes Norris Keiller for invaluable help in assembling the gasoline price data. We would also like to thank the ESRC Centre for the Microeconomic Analysis of Public Policy at the Institute for Fiscal Studies and the ERC advanced grant MICROCONLAB at University College London for financial support. We are grateful to the editor, Bryan Graham, and two referees for helpful comments. We thank seminar participants at the Heterogeneity in Supply and Demand conference at Boston College and the Bristol Econometric Study Group Annual Conference for helpful comments. We are grateful to Agnes Norris Keiller for invaluable help in assembling the gasoline price data. We would also like to thank the ESRC Centre for the Microeconomic Analysis of Public Policy at the Institute for Fiscal Studies and the ERC ad-vanced grant MICROCONLAB at University College London for financial support.
ASJC Scopus subject areas
- Social Sciences (miscellaneous)
- Economics and Econometrics