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Estimating Discrete Games with Many Firms and Many Decisions: An Application to Merger and Product Variety

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  • Ying Fan
  • Chenyu Yang

Abstract

This paper presents a method for estimating discrete games based on bounds of conditional choice probabilities. The bounds are probabilities that an action is dominant and that it is not dominated. Because the bounds are easy to compute, our method is scalable to models with many firms and discrete decisions. We apply the method to study the effects of a hypothetical merger on firm entry and product variety in local retail craft beer markets in California. We find that the merger induces firm entry. The net effect on product variety is ambiguous once a fixed cost efficiency is taken into account.

Suggested Citation

  • Ying Fan & Chenyu Yang, 2025. "Estimating Discrete Games with Many Firms and Many Decisions: An Application to Merger and Product Variety," Journal of Political Economy, University of Chicago Press, vol. 133(6), pages 1886-1931.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/734724
    DOI: 10.1086/734724
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    Cited by:

    1. Xuan Teng, 2023. "Self-preferencing, Quality Provision, and Welfare in Mobile Application Markets," Rationality and Competition Discussion Paper Series 434, CRC TRR 190 Rationality and Competition.
    2. repec:ags:aaea22:335481 is not listed on IDEAS
    3. Javier D. Donna & Pedro Pereira, 2024. "Structural Presumptions for Non-horizontal Mergers in the 2023 Merger Guidelines: A Primer and a Path Forward," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 65(1), pages 303-345, August.
    4. Wesley Blundell & Kyle Wilson, 2023. "Acquisitions, product variety, and distribution in the U.S. craft beer industry," Economic Inquiry, Western Economic Association International, vol. 61(4), pages 1053-1076, October.
    5. Fabrizio Leone & Rocco Macchiavello & Josepa Miquel-Florensa & Nicola Pavanini, 2025. "Market Structure, Vertical Integration and Farmers’ Welfare in the Costa Rica Coffee Industry," CESifo Working Paper Series 11776, CESifo.
    6. , 2023. "Price Competition and Endogenous Product Choice in Networks: Evidence from the US airline Industry," Working Papers 950, Queen Mary University of London, School of Economics and Finance.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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