Nonparametric estimation of exact consumer surplus with endogeneity in price
نویسندگان
چکیده
This paper analyzes a structural microeconomic relation describing the exact consumer surplus in a nonparametric setting with endogenous prices. The exact consumer surplus can be characterized as the solution of a differential equation involving the observed demand function. The strategy put forward in this paper involves two steps: first estimate the demand function with endogeneity using nonparametric IV, second plug this estimator into the differential equation to estimate the exact consumer surplus. The rate of convergence for this estimator is derived and is shown to be faster than the rate for the underlying nonparametric IV regression estimator. Solving the differential equation smooths the demand estimator and leads to a faster rate of convergence. The implementation of the methodology is illustrated through a simulation study.
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