Dear R user,
I have been setting up the models for predicting the volume based on the price
information of own product and competitive products. one option is to use
instrumental variable to break price into two parts: one part that might be
correlated with error term, and the another part that is not.
But now I met the problem of choosing instumental variables. I have searched
many papers. it has been mentioned that cost can be used as one instrumental
variable for the price. yes. I can use cost for own price. but how about the
competitive price's instrumental variables? I don't know their
cost information at all except their price information and market share. I will
be really appreciated if someone can suggest me the possible choices of
instrumental variables for the competitive price?
Thanks in advance.
Kind regards,
Tammy
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