“Structural vs. Reduced Form”
quality, and ϵ is a cost shock (unobserved shifter of costs) •demand D (p,t, η), where p is price, η is a demand shock •taking (t, ϵ, η) as given, solve for eqm price and quantity: p∗(t, ϵ, η) q∗(t, ϵ, η) = D (p∗(t, ϵ, η),t, η) The theorist’s reduced forms are p∗(t, ϵ, η) and q∗(t, ϵ, η).
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