The Use of the Logit Model in Applied Industrial Organization

Abstract

Qualitative choice models, such as the logit model, can capture important firm and product asymmetries. This paper surveys use of the logit model in industrial organization, with special focus on its application to merger analysis. The basic model and its motivation are reviewed, as is its estimation. Discussed in some detail is the use of the logit model to predict the price and welfare effects of horizontal mergers in differentiated products industries. Simulation using a qualitative choice model is argued to be far superior to traditional structural analysis. Logit merger simulations have the particular virtues of low informational and computational burdens and the use of the logit model can be motivated as reflecting a diffuse prior on the structure of demand.Quantitative Choice; Mergers; Antitrust, JEL classifications: D43, L25, L4,

Complementarities and Spillovers in Mergers: An Empirical Investigation Using Patent Data

“…Since Hall uses a large inter-industry sample, she uses sampling in order to reduce the choice set for each firm (see also McFadden (1973) for a discussion of the cost of sampling in the context of qualitative choice). Werden et al (1996) describe the uses of simulation methods with qualitative choice models, which they argue is preferred to traditional approaches. Sorenson (2000) uses factor analysis and logit regression on a large sample to investigate the motives for mergers in the 1990s.…”

“…Qualitative choice models have also been used to examine the determinants of mergers (see Werden, Froeb and Tardiff (1996) for a survey). Hall (1988) contains an excellent description of the econometric issues that arise in applying qualitative choice models to the market for corporate control.…”

Análise de concorrência no mercado mundial de café verde

“…A demanda, por sua vez, é afetada pela renda, pela política de incentivo ao consumo e por O ALM é um dos sistemas de demanda mais usados em análises antitruste por sua simplicidade e pela reduzida necessidade de dados (WERDEN et al, 1996). Informações sobre preços e quantidades vendidas dos bens em cada mercado são suficientes para se obter os valores das elasticidades-preço dos bens envolvidos.…”

“…Em outras palavras, parte-se da hipótese de que a utilidade do agente representativo pode ser decompostaem uma parte determinista e uma parte estocástica, assumindo-se a linearidade do componente determinista em relação ao preço, nos moldes de Werden et al (1996). o paladar (SAES e FARINA, 1999).…”

Estimation of patent licensing value using a flexible demand specification

“…package of Honey Nut Cheerios) and sold the resulting data to the product manufacturers, who then used it for market research purposes. Retail scanning data have also proved to be quite useful for economists interested in investigating the competitive interactions between products covered by these data (see, e.g., Hausman, et al, 1994;Werden and Froeb, 1994;Werden, et al, 1996;Hausman, 1997;Hausman and Leonard, 1997;Nevo, 2000Nevo, , 2001Hausman and Leonard, 2002).…”