Merger Simulation with Nested Logit Demand – Implementation using Stata

Posted by D. Daniel Sokol

Jonas Bjornerstedt (Swedish Competition Authority) and Frank Verboven (University of Leuven) discuss Merger Simulation with Nested Logit Demand – Implementation using Stata

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.