Quantitative Techniques for Competition and Antitrust Analysis_1 pdf

[...]... individual linear demand function for a homogeneous product: Qi D 50 0:5Pi or rather for the inverse demand function, Pi D 100 2Qi More generally, we may write Qi D D.Pi ; y/.1 Inverting the demand curve to express price as a function of quantity demanded and other variables yields the “inverse demand curve” Pi D P Qi ; y/ Standard graphs of an individual’s demand curve plot the quantity demanded of the good... Press for his support, encouragement, and patience and Jon Wainwright from T&T Productions Ltd for his tireless efforts to typeset the book in the face of numerous corrections and amendments Enrico Pesaresi provided valuable support throughout the process We also thank Frank Verboven and Christian Huveneers for their detailed comments on the draft version And, of course, the anonymous reviewers for their... respect to the logarithm of price of the log transformation of demand curve: Ájj D Pj @Qj @ ln Qj D : Qj @Pj @ ln Pj 7 The term “elasticity” is sometimes used as shorthand for “price elasticity of demand,” which in turn is shorthand for “the elasticity of demand with respect to prices.” We will sometimes resort to the same shorthand terminology since the full form is unwieldy That said, we do so with the... of some other good k on the demand for good j A new, higher, price for pk may, for instance, induce some consumers to change their purchases of product j If consumers increase their purchases of product j when pk goes up, we will call products j and k demand substitutes or just substitutes for short Two DVD players of different brands are substitutes if the demand for one of them falls as the price... the data and the properties that are simply assumed whatever the estimated parameter values An important aspect of the demand function will be its curvature and how this changes as we move along the curve The curvature of the demand curve will determine the elasticity and therefore the impact of a change in price on quantity demanded 1.1.3.1 Linear Demand The linear demand is the simplest demand specification... the difference for the classic continuous choice demand case, readers may recall the difference between Marshall’s demand curve, which is a function of price for a given level of income d.p; y/ and the Hicksian demand, which is described as a function of price for a given level of utility, d.p; u/ (Hicks 1956) See the discussion in, for example, Deaton and Muellbauer (1980b, chapter 7) For more on practical... for example, Lewbel (2003) and references therein.) 1.1.2 Demand Elasticities Elasticities in general, and demand elasticities in particular, turn out to be very important for lots of areas of competition policy The reason is that the “price elasticity of demand” provides us with a unit-free measure of the consumer demand response to a price increase.7 The way in which demand changes when prices go... elements of economic analysis is crucial for an appropriate use of quantitative techniques 1.1 Demand Functions and Demand Elasticities The analysis of demand is probably the single most important component of most empirical exercises in antitrust investigations It is impossible to quantify the likelihood or the effect of a change in firm behavior if we do not have information about the potential response... familiar with the shape and meaning of the demand function, we will take the time to briefly review the derivation of the demand and its main properties since basic conceptual errors in its handling are not uncommon in practice In subsequent chapters we will see that demand functions are critical for many results in empirical work undertaken in the competition arena 1.1.1 Demand Functions We begin this... of air travel may reduce the demand for train trips, holding the price of train trips constant On the other hand, the new higher price of k may induce consumers to buy less of good j For example, if the price of ski passes increases, perhaps fewer folk want to go skiing and so the demand for skiing gear goes down Similarly, if the price of cars increases, the demand for gasoline may well fall When . w0 h1" alt="" Quantitative Techniques for Competition and Antitrust Analysis This page intentionally left blank Quantitative Techniques for Competition and Antitrust Analysis Peter Davis and. 19 70– Quantitative techniques for competition and antitrust analysis / Peter Davis, Eliana Garc´es. p. cm. Includes bibliographical references and index. ISBN 978-0-6 91- 14257-9 (alk. paper) 1. . ix Acknowledgments xii 1 The Determinants of Market Outcomes 1 1 .1 Demand Functions and Demand Elasticities 1 1.2 Technological Determinants of Market Structure 19 1. 3 Competitive Environments: Perfect Competition,