Of course, you are absolutely right! Now I got your point. Again thank you very much!
I had to re-think my model and came to the conclusion that the model is correctly specified
but my interpretation of the parameter was incorrect. I need an estimate of the d.g.p. in a purely statistical sense.
Hence, I neither need the elasticity of demand nor the one of supply but the elasticity of the "supply-demand equilibrium",
which is the variance-weighted average of those. Then, I can describe situations in which the same b1 arises
from different settings of elasticities and variances. My intention is to give a meaningful interpretation to the coefficient.
Now, given the endogeneity of p(i,t), can I difference the fixed effect out and use -reg-?
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