Identification and Estimation of Nonparametric Hedonic Equilibrium Model with Unobserved Quality∗

This paper studies a nonparametric hedonic equilibrium model in which certain product characteristics are unobserved. Unlike most previously studied hedonic models, both the observed and unobserved agent heterogeneities enter the structural functions nonparametrically. Prices are endogenously determined in equilibrium. Using both withinand cross-market price variation, I show that all the structural functions of the model are nonparametrically identified up to normalization. In particular, the unobserved product quality function is identified if the relative prices of the agent characteristics differ in at least two markets. Following the constructive identification strategy, I provide easy-to-implement series minimum distance estimators of the structural functions and derive their uniform rates of convergence. To illustrate the estimation procedure, I estimate the unobserved efficiency of American full-time workers as a function of age and unobserved ability.