Testing models of differentiated products markets: : Consolidation in the cable tv industry

• Autores: David P. Byrne
• Localización: International economic review, ISSN-e 1468-2354, Vol. 56, Nº. 3, 2015, págs. 805-850
• Idioma: inglés
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• Resumen

  • Research on differentiated products markets often uses structural demand/supply models to identify firms' marginal costs as product-level cost data are unavailable. Using unique demand and cost data from cable TV, I evaluate a differentiated products model's ability to identify marginal costs. I find firms systematically price below profit-maximizing levels, leading to biases in the model's marginal cost estimates. I study the implications for merger simulations and find that these biases compromise estimates of merger-related cost efficiencies, yet do not prevent these models from generating useful predictions of the price and nonprice effects of mergers