The Difference-in-Differences Approach in the Estimation of Cartel Damage

Abstract

A crucial step in the quantification of damage in the context of damages claims is the estimation of the counterfactual price level: the price level that would have been observed in the absence of the cartel. This article discusses the Difference-in-Differences (“DiD”) estimation procedure for the estimation of counterfactual prices. While DiD is a very powerful estimation method, it is demanding in terms of conditions that need to be satisfied to allow a proper application, notably the common trend assumption. The aim of this article is to introduce the DiD approach, the underlying common trend assumption, and to draw implications for its use in the quantification of damage.

Keywords: Difference-in-differences, damage, quantification, competition, antitrust, econometric methods

JEL Classification: C21, K21, L41