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Merger Simulation with Nested Logit Demand - Implementation using Stata

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Abstract

In this article we show how to implement merger simulation in Stata 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.

Suggested Citation

  • Björnerstedt, Jonas & Verboven, Frank, 2013. "Merger Simulation with Nested Logit Demand - Implementation using Stata," Konkurrensverket Working Paper Series in Law and Economics 2013:2, Konkurrensverket (Swedish Competition Authority).
    • Handle: RePEc:hhs:kkveco:2013_002
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    File URL: http://www.konkurrensverket.se/globalassets/publikationer/workingpaper/working_paper_2013-2.pdf
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    Keywords

    mergersim; merger simulation; aggregate nested logit model; unit demand; constant expenditures demand;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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