Chengyu Yang - University of Maryland

Applied Micro Theory Seminar
When Oct 21, 2021
from 03:30 PM to 05:00 PM
Where Zoom Link
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Chengyu Yang will present "Estimating Discrete Games with Many Firms and Decisions: An
Application to Merger and Product Variety" joint work with Ying Fan

We develop a new method to estimate discrete games based on bounds of conditional
choice probabilities. The method does not require solving the game and is scalable to
models with potentially many firms and many discrete decisions. We apply the method
to estimate a model of entry and product variety for the retail craft beer market in
California. Using the estimated model, we simulate a counterfactual merger where
a large brewery acquires multiple craft breweries. We find that the merger would
cause new firms to enter, non-merging incumbents to add products and merging firms
to drop products. However, more products are dropped than added, and consumer
surplus decreases. Larger markets are likely to see a smaller loss in per-capita consumer
surplus, and markets where the merging firms have a greater market power see a larger
reduction in the number of products.

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