Econometrics of Competition (X)

Objective

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. We will use data-driven examples from selected industries in France and internationally. The content of the course will be based on a discussion of selected academic papers to introduce the theory and their practical applications to competition and regulatory cases.

The course will combine lectures and hands-on sessions during which real industry data sets will be used to conduct econometric estimations in R. Regular homework assignments will also enable to practice independently the empirical methods taught during the lectures.

Students should be able to:

• Learn about the practical considerations to apply techniques, based on the lessons from various recent cases where quantitative techniques have been applied.
• Understand the different techniques for quantitative assessment of competition and regulatory matters, such as in defining markets
• Estimate demand functions (homogenous and differentiated products)
• Undertake quantitative analysis relevant to analyzing competition and regulation matters such as the identification of market power, merger simulations, and estimation of damages.
• Learn to interpret and critically evaluate the empirical results from different approaches.
• Develop a good common sense of the advantages and disadvantages of different approaches, and the circumstances under which they are (not) suitable.
• Acquire a thorough understanding of the data requirements for applying various techniques.

Procedures for evaluation will be given by the professor and Ecole Polytechnique.

https://synapses.polytechnique.fr/catalogue/2024-2025/ue/781/ECO-53451-EP-econometrics-of-competition?from=D5

Planning

Detailed programme

Session 1: Oligopolistic Competition Refresher

• Introduction to course and course structure
• The Cournot Game - quantity competition
• Bertrand's Paradox - price competition
• Price competition with differentiated products

Session 2: Estimation of Demand for Homogenous Goods

• New Empirical Industrial Organization (NEIO)
• Estimating the demand function for a homogenous good
• Simultaneity of demand and supply

Session 3: Identification of Conduct and Collusion

• Identification of conduct parameter
• Inferring collusion from market data
• Discussion of Genesove and Mullin (1998)

Session 4: Homogenous Goods Tutorial

• Practical R workshop on the estimation of railway cartel (read Porter, 1983)
• Introduction to Exercise 1

Sessions 5: Product Differentiation, Multinomial and Nested Logit

• Differentiated goods
• Discrete choice model and characteristics space
• Logit model and nested logit model
• Estimating demand elasticities

Sessions 6: Differentiated Products Tutorial

• Practical R workshop on differentiated demand estimation
• Introduction to Exercise 2

Session 7: Market Structure and Entry

• Bresnahan and Reiss framework for empirical analysis
• Market entry in telecommunications markets

Session 8: Merger Analysis

• Overview of merger control
• Unilateral and coordinated effects
• SSNIP test
• Diversion Ratios
• Upward Pricing Pressure (UPP)
• Introduction to merger simulation

Session 9: Merger Analysis Tutorial

• Practical R workshop on merger analysis
• Calculating market shares, HHI and UPP
• Introduction to Exercise 2