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Merger simulation with nested logit demand

Author

Listed:
  • Jonas Björnerstedt

    (Swedish Competition Authority)

  • Frank Verboven

    (University of Leuven)

Abstract

In this article, we show how to implement merger simulation in Stata as a postestimation command, that is, after estimating an aggregate nested logit demand system with a linear regression model. We also show how to implement merger simulation when the demand parameters are not estimated but instead calibrated to be consistent with outside information on average price elasticities and profit margins. We allow for a variety of extensions, including the role of (marginal) cost savings, remedies (divestiture), and conduct different from Bertrand–Nash behavior.

Suggested Citation

  • Jonas Björnerstedt & Frank Verboven, 2014. "Merger simulation with nested logit demand," Stata Journal, StataCorp LP, vol. 14(3), pages 511-540, September.
    • Handle: RePEc:tsj:stataj:v:14:y:2014:i:3:p:511-540
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    Citations

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    Cited by:

    1. Laser, Falk & Hellwig, Michael, 2019. "Agony of Choice – Trading off Stability and Competition in the Banking Markets," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203536, Verein für Socialpolitik / German Economic Association.
    2. Melo, Carolina & Moita, Rodrigo & Sunao, Stefanie, 2021. "Passing through the supply chain: Implications for market power," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    3. Hellwig, Michael & Laser, Falk Hendrik, 2019. "Bank mergers in the financial crisis: A competition policy perspective," ZEW Discussion Papers 19-047, ZEW - Leibniz Centre for European Economic Research.
    4. Yan Yang, 2019. "A New Solution to Market Definition: An Approach Based on Multi-dimensional Substitutability Statistics," Papers 1906.10030, arXiv.org.

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