The Use of the Logit Model in Applied Industrial Organization
AbstractQualitative choice models, such as the logit model, can capture important firm and product asymmetries. This paper surveys use of the logit model in industrial organization, with special focus on its application to merger analysis. The basic model and its motivation are reviewed, as is its estimation. Discussed in some detail is the use of the logit model to predict the price and welfare effects of horizontal mergers in differentiated products industries. Simulation using a qualitative choice model is argued to be far superior to traditional structural analysis. Logit merger simulations have the particular virtues of low informational and computational burdens and the use of the logit model can be motivated as reflecting a diffuse prior on the structure of demand.
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Bibliographic InfoPaper provided by U.S. Department of Justice - Antitrust Division in its series Papers with number 94-1.
Length: 25 pages
Date of creation: 1994
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competition ; production ; enterprises ; consumption;
Other versions of this item:
- Gregory Werden & Luke Froeb & Timothy Tardiff, 1996. "The Use of the Logit Model in Applied Industrial Organization," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 3(1), pages 83-105.
- JEL - Labor and Demographic Economics - - - - -
- cla - - - - - -
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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- Oliver Budzinski & Isabel Ruhmer, 2009.
"Merger Simulation in Competition Policy: A Survey,"
82/09, University of Southern Denmark, Department of Environmental and Business Economics.
- Gregory Werden & Luke Froeb & James Langenfeld, 2000. "Lost Profits from Patent Infringement: The Simulation Approach," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 7(2), pages 213-227.
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Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt93s769k8, Department of Agricultural & Resource Economics, UC Berkeley.
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- Gregory J. WERDEN, 1997. "Simulating The Effects Of Differentiated Products Mergers: A Practitioners' Guide," Department of Resource Economics Regional Research Project 967, University of Massachusetts.
- Dubin, Jeffrey A., 2007. "Valuing intangible assets with a nested logit market share model," Journal of Econometrics, Elsevier, vol. 139(2), pages 285-302, August.
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