Challenges in Merger Simulation Analysis
AbstractIn this paper, we share our experience with merger simulations using a Random Coefficient Logit model on the demand side and assuming a static Bertrand game on the supply side. Drawing largely from our work in Knittel and Metaxoglou (2008), we show that different demand estimates obtained from different combinations of optimization algorithms and starting values lead to substantial differences in post-merger market outcomes using metrics such as industry profits, and change in consumer welfare and prices.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 101 (2011)
Issue (Month): 3 (May)
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- Aviv Nevo, 2003.
"Measuring Market Power in the Ready-to-Eat Cereal Industry,"
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- Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
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