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Econometrics of Competition (ECO-AD-ECOCOMP)

ECO-AD-ECOCOMP

Purpose

Course Abstract
The purpose of this module is to equip students with the specialist tools to conduct quantitative economic assessments relevant to competition cases and regulatory matters. It will cover key techniques to empirically analyze markets within time constraint of 12 hours (4 session of 3 hours). The content of the course will be based on a discussion of selected academic papers to introduce the theory and its practical applications to competition and regulatory cases. After this short course, students should be able to:
•Understand the different techniques for quantitative assessment of competition and regulatory matters
•Estimate demand functions (homogenous and differentiated products)
• Develop a good common sense of the advantages and disadvantages of different approaches
• Acquire a thorough understanding of the data requirements for applying various techniques.
Main Reading
• Davis, P. and E. Garces (2009) “Quantitative Techniques for Competition and Antitrust Analysis”, Princeton University Press.
Assessment
•Take-home examination which will require estimating an empirical model and answering several questions based on the estimates.

Description

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Session 1: Estimation of Demand for Homogenous Goods
•New Empirical Industrial Organization (NEIO)
•Estimating the demand function for a homogenous good
•Simultaneity of demand and supply
Readings
•Davis and Garces (2009), Chapters 2 and 9

Session 2: Identification of Conduct and Collusion
•Identification of conduct parameter
•Inferring collusion from market data
•Discussion of Genesove and Mullin (1998)
•Practical R workshop on the estimation of railway cartel (read Porter, 1983)
Readings
•Davis and Garces (2009), Chapter 6
•Genesove and Mullin (1998) “Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914”, RAND Journal of Economics
•Porter, R.H. (1983) “A study of cartel stability: the Joint Executive Committee, 1880-1886”. The Bell Journal of Economics

Session 3: Product Differentiation, Multinomial and Nested Logit
•Differentiated goods
•Discrete choice model and characteristics space
•Logit and nested logit model
•Estimating demand elasticities
•Practical R workshop on differentiated demand estimation
Readings
•Davis and Garces (2010), Chapter 9
•Berry, S. (1994), “Estimating Discrete-Choice Models of Product Differentiation”, RAND Journal of Economics
• Train, K. (2009) “Discrete Choice Methods with Simulation”
Session 4: Market Structure and Entry
•Bresnahan-Reiss framework for empirical analysis
•Entry into telecommunications markets

Readings
•Davis and Garces (2009), Chapter 5
• Bresnahan, T. F. and P. C. Reiss (1991). “Entry and competition in concentrated markets”, Journal of Political Economy 99(5), 977–1009

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