Estimating Discrete Games with Many Firms and Many Decisions: An Application to Merger and Product Variety / Ying Fan, Chenyu Yang.

Format:

Book

Author/Creator:

Fan, Ying (Associate Professor)

Contributor:

National Bureau of Economic Research.

Yang, Chenyu.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30146.

NBER working paper series no. w30146

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

This paper presents a new method for estimating discrete games based on bounds of conditional choice probabilities. The method does not require solving the game and is scalable to models with many firms and many discrete decisions. We apply the method to study merger effects on firm entry and product variety in the retail craft beer market in California. We simulate an acquisition of multiple craft breweries by a large brewery and find that the acquisition would induce firm entry and product entry by non-merging firms. However, these changes are insufficient to offset the negative welfare effects resulting from the higher prices and decreased product offerings by the merging firms.

Notes:

Print version record

June 2022.