Build Differentiation Instruments (Gandhi & Houde 2020) — build_differentiation_instruments • rblp

Constructs instruments based on product proximity in characteristic space.

Usage

build_differentiation_instruments(
  X,
  market_ids,
  firm_ids,
  method = "local",
  interact = NULL
)

Arguments

X: Matrix of product characteristics (N x K)
market_ids: Market identifiers (length N)
firm_ids: Firm identifiers (length N)
method: "local" (count nearby products) or "quadratic" (sum squared distances)
interact: Optional matrix of interaction characteristics (N x L)

Value

Matrix of instruments