| name | rje-identification-strategy |
| description | Use when the identification or estimation strategy is the bottleneck for a RAND Journal of Economics (RJE) industrial-organization manuscript — structural demand/supply, entry and dynamic games, auctions, or reduced-form designs off mergers and regulation. Stress-tests the design to the IO-flagship bar before tables are drafted. |
Identification Strategy (rje-identification-strategy)
When to trigger
- Your structural model's identification (instruments, functional form, moments) is unargued
- A merger/regulation evaluation rests on TWFE over staggered timing with no modern estimator
- An IV's first stage or exclusion restriction is weak in an IO setting
- You are unsure your design clears the RJE industrial-organization bar
The RJE identification bar
RJE is the flagship industrial-organization journal, so identification is judged by IO norms: the economic model and the source of identifying variation must be explicit, and counterfactuals must be disciplined by the model and the data. Both structural and reduced-form work is welcomed — there is no preference for one, but each carries field-specific obligations.
Branch A: Structural demand (BLP-style)
- Price endogeneity is the central threat. Instrument price with cost shifters, rival/own product characteristics (BLP instruments), or Gandhi–Houde differentiation instruments; argue their validity in market terms.
- Add micro-moments (consumer-level data) where available to pin down substitution and heterogeneity.
- State functional-form assumptions (random-coefficients distribution) and show key elasticities are reasonable, not artifacts.
Branch B: Supply, conduct & markups
- Be explicit about the conduct assumption (Nash-Bertrand, Cournot, collusion) and, where possible, test conduct rather than assume it.
- Identify marginal cost from the supply-side FOCs; show pass-through and markups are economically sensible.
Branch C: Entry / dynamic games
- For static entry, address multiplicity of equilibria (bounds, equilibrium selection).
- For dynamic models, justify the CCP / two-step (Hotz–Miller) approach or full-solution estimation, and state the state space and discount factor handling.
Branch D: Auctions
- Map the observed bids to the value distribution through the equilibrium first-order conditions; state the information paradigm (private vs common values).
Branch E: Reduced-form (mergers / regulation)
- Name the policy or merger shock giving exogenous variation; defend it institutionally.
- Staggered timing? Move beyond TWFE — use Callaway–Sant'Anna, Sun–Abraham, or de Chaisemartin–D'Haultfœuille, with an event-study plot and a Goodman-Bacon check.
- For IV: strong first stage, weak-IV-robust inference, and an exclusion restriction argued from market institutions.
Execution bridge (StatsPAI / Stata MCP)
Estimate and audit the design, don't only describe it. Full map:
execution-with-mcp. RAND is industrial organization — endogeneity of prices/entry and structural demand; the reduced-form chain for causal claims, structural IO outside it.
detect_design → recommend → fit with as_handle=true → audit_result.- Observational causal claims: staggered DiD (
callaway_santanna / sun_abraham +
bacon_decomposition + honest_did_from_result); IV (effective_f_test +
anderson_rubin_ci); RDD (rdrobust + mccrary_test).
- Experiments: randomization-based inference +
romano_wolf for many-outcome control.
- Sensitivity:
oster_delta / sensemakr for observational claims.
Report the magnitude in interpretable units; route the full battery to the appendix. A
run end-to-end (synthetic data, real returns) is in the JF execution walkthrough.
Checklist
Variation-to-parameter map (what pins down which primitive)
RJE referees want an explicit account of which variation identifies which structural object.
| Structural object | Identifying variation | Threat if absent |
|---|
| Own-price elasticity | Cost/input-price shifters orthogonal to demand shocks | Endogeneity biases elasticity to zero |
| Substitution / random coefficients | Rival characteristics across markets; micro-moments | Restrictive IIA, wrong merger effects |
| Marginal cost | Supply-side FOCs given conduct and demand | Cost confounded with markup |
| Conduct parameter | Demand rotations (slope- vs level-shifters) | Conduct assumed, not identified |
Worked vignette: identifying conduct in an entry model
Suppose you study airline entry on city-pair routes (illustratively 1,200 routes over six years, one potential entrant each) and ask whether incumbents deter entry.
- Identifying variation: endpoint market-size shifters move entry value; slot/gate cost shifters move fixed costs independently.
- Multiplicity: simultaneous entry admits multiple equilibria — use Ciliberto-Tamer-style bounds or an explicit selection rule, and report the parameter set.
- One-sentence map: "Demand shifters identify entry value, cost shifters identify fixed costs, and incumbent presence correlating with non-entry net of profitability identifies deterrence."
Referee-pushback patterns and the venue fix
- "Demand identification rests on functional form, not variation." Fix: show which excluded instruments move price versus substitution, and perturb the random-coefficient distribution to prove the elasticities are not artifacts.
- "The exclusion restriction is asserted, not defended." Fix: argue why the cost shifter is plausibly orthogonal to the demand shock here, and probe with an overidentification or placebo-instrument check.
- "Conduct is assumed Nash-Bertrand without test." Fix: run a conduct test (Rivers-Vuong or a markup restriction) or report results under competing conduct models.
- "Pre-trends violate the reduced-form design." Fix: show event-study leads, use the heterogeneity-robust estimator, and report the Goodman-Bacon decomposition.
Anti-patterns
- A demand system with price treated as exogenous, or weak/unargued price instruments
- Assuming Nash-Bertrand conduct when the data could test it
- TWFE on staggered merger/regulation timing with no heterogeneity-robust estimator
- Selling an in-sample fit as a credible far-out-of-sample counterfactual
Output format
【Approach】structural demand / conduct / entry-dynamics / auctions / reduced-form
【Identifying variation】one sentence
【Key assumptions】[instruments, conduct, equilibrium selection, exclusion]
【Diagnostics done】[elasticities, first-stage F, pre-trends, conduct test]
【Diagnostics missing】[...]
【Next step】rje-data-analysis
