The Perils of Antitrust Econometrics: Unrealistic Engel Curves, Inadequate Data, and Aggregation Bias

30 Pages Posted: 7 Jun 2023

Date Written: March 29, 2023

Abstract

Some economists argue antitrust policy should be based on empirical methods used by the Industrial Organization subdiscipline of economics, but non-economists must understand that those methods contain certain highly restrictive assumptions. Those assumptions involve econometric “identification,” and treating aggregate demand as if it were generated by a representative consumer (Muellbauer’s “generalized linear” preferences). We derive new results illustrating how restrictive the representative consumer assumption is; we explain aggregation bias in Almost Ideal Demand System models; and we show that data limitations make it even harder to justify economists’ restricting aggregate demands as one would the demand of a single individual.

Keywords: Antitrust econometrics; Almost Ideal Demand System (AIDS); New Brandeis School

JEL Classification: D12, C43, L4, C54

Suggested Citation

Lozada, Gabriel, The Perils of Antitrust Econometrics: Unrealistic Engel Curves, Inadequate Data, and Aggregation Bias (March 29, 2023). Institute for New Economic Thinking Working Paper Series No. 203, Available at SSRN: https://ssrn.com/abstract=4470296

Gabriel Lozada (Contact Author)

University of Utah ( email )

1645 E. Campus Center
Salt Lake City, UT 84112
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
55
Abstract Views
261
Rank
757,373
PlumX Metrics