Econometrics Legal, Practical, And Technical Issues Second .

EconometricsLegal, Practical, andTechnical IssuesSecond Edition

CONTENTSForewordPrefacexiiixvChapter 1An Introduction to Econometric AnalysisA. How Econometrics Can Be Helpful in an Antitrust Analysis1. Providing Measures of Quantitative Inputs to anAntitrust Analysis2. Identifying and Measuring Causal Relationships3. Testing Propositions about the Behavior of Companiesand ConsumersB. The Elements of an Econometric Study1. Articulating the Question to Be Studied2. Considering the Underlying Economics3. Collecting Relevant and Useful Data4. Formulating and Estimating an Econometric Model5. Interpreting the Resultsa. A Word of Caution in Interpreting a "Not StatisticallySignificant" Resultb. A Word of Caution in Interpreting a "StatisticallySignificant" Result6. Presenting the ResultsC. ConclusionsChapter 2Formulating Empirical Questions of InterestA. Market Definition and Market Power1. Market Definition2. Market PowerB. Merger Analysis1. Prospective Analysisa. Event Analysisb. Demand Modelingiii1122334455567791111111415151516

ivC.D.E.Econometrics2. Retrospective AnalysisDamages1. Overcharges2. Lost ProfitsClass CertificationConclusionsChapter 3The Econometric FrameworkA. Brief History of Statistics and Econometrics: DrawingInferences about Causal Relationships from Data1. Statistics and Randomized Experimental Design2. Causality3. Econometricsa. Structural Modelsb. Econometric Estimation Methods for StructuralModelsc. Reduced Form Modelsd. Analysis of Natural Experimentse. Specification TestingB. ConclusionsChapter 4Collecting Relevant and Useful DataA. IntroductionB. Nature of Economic Data1. Cross-Sectional Data2. Time Series Data3. Data with Both Cross-Sectional and Time Series DataC. Types of Data1. Accounting Data2. Transaction Data3. Scanner Data4. Survey DataD. Sources of DataL Ordinary Course Data Maintained by the Parties2. Commercial 646474848495154555556

ContentsE.F.3. Publicly Available DataData Considerations That May Affect the Analysis1. Outliers2. Missing Observation3. Small Sample Size4. Omitted Variables5. Data Aggregation6. Admissibility of Data AnalysisConclusionsChapter 5Specifying and Estimating an Appropriate EconometricModelA. Basics of an Econometric ModelB. Key Considerations in Specifying an Econometric Model1. Examples of How Available Data Affects theSpecification of Econometric Modelsa. Fixed Effectsb. Benchmark Models(1) Cross-Sectional Data and ContemporaneousBenchmark Models(2) Time Series Data and Before-and-After Models(3) Panel Data and Difference-in-Differences Models2. Multiple Equation Models3. Analyzing Consumer Preferences Using Discrete ChoiceModelsC. Some Potential Modeling and Estimation Issues1. Functional Form2. Omitted Variables3. Multicollinearity4. Endogeneity5. Homoskedasticity, No Autocorrelation, and OtherAssumptions of the Classical Linear Regression ModelD. ConclusionsChapter 6Interpreting Regression 80818283868889

viA.B.C.D.E.EconometricsUnderstanding Regression Results1. Evaluating the Specification of the Regression Model2. Interpreting Regression Coefficients in an OESRegression Model3. Interpreting Regression Coefficients in a DiscreteChoice Model4. An Example: Estimating Price OverchargesHypothesi s Testing1. Statistical Testsa. Hypotheses about a Single Parameter: t-testsb. Testing Multiple Hypotheses: F-tests2. Statistical Significance3. Practical SignificanceSpecification Testing1. Goodness of Fita. R-Squared and Adjusted R-Squaredb. Tests to Compare Two Model Specifications2. Modeling Issues That Could Affect the Reliability of theResultsa. Omitted Variablesb. Multicollinearityc. Endogeneityd. Heteroskedasticity and Autocorrelatione. Special Considerations in Time Series AnalysisData Issues That Could Affect the Reliability of the Results1. Insufficient Data2. Outliers3. Missing Data4. Measurement Errors5. Improper Aggregation of the DataConclusionsChapter 7Presentation of Econometric AnalysesA. Knowing Your Audience1. The Client2. Opposing Counsel and 06107109111111112113114115116117117118118

Contents3. The Judge4. The JuryB. Presenting Econometric Evidence in an Expert Report1. Preparing an Econometric Primera. Laying Out Basic Concepts of Econometricsb. Introducing More Advanced Concepts ofEconometrics2. Describing the Underlying Data3. Describing the Choice of Regression Models4. Discussing the Variables5. Presenting the Results of an Econometric Analysis6. Presenting the Robustness of Econometric Results7. Presenting Critiques of the Econometric Analysis8. Demonstrative ExhibitsC. Presenting Econometric Evidence at Trial1. Trial Testimony2. Approaches and ExamplesD. ConclusionsChapter 8Evidentiary IssuesA. Admissibility Under Daubert1. Introduction2. Qualifications of the Expert3. Relevance4. Sufficient Facts or Dataa. Weaknesses in the Underlying Datab. The "Fit" Between the Data and the Analysis5. Reliabilitya. Analysis Can Be Empirically Testedb. Analysis Has Been Published or Subjected to PeerReviewc. Analysis Presents an Acceptable Known or PotentialRate of Errord. Analysis Is Generally Accepted in 161163164165

viiiB.C.D.Econometricse. Analysis Grows Naturally and Directly Out ofResearch Conducted Independently of the Litigationf. Analysis Includes All Relevant Variablesg. Analysis Treats Outliers AppropriatelyBürden of ProofAdditional Issues Regarding the Admissibility ofEconometric Evidence1. Appellate Standard of Review2. Preserving the Issue of Admissibility on Appeal3. Using Daubert Factors after Admission4. Using Daubert Factors at Class Certification ter 9Expert DiscoveryA. Discovery of Testifying Experts1. Document and Data Discovery2. Deposition of a Testifying Experta. Expert's Qualifications as an Econometricianb. Potential Data Problemsc. Violations of Statistical Assumptionsd. Prior Inconsistent Econometric Resultse. Discussions with Other ExpertsB. Discovery of Non-Testifying ExpertsC. Other Discovery Issues1. Discovery from Non-Parties2. Discovery from the Governmenta. Governmental Privilegesb. The Freedom of Information Act3. Consequences of Non-ComplianceD. 207211212214Chapter 10Applying Econometrics to Assess Market Definition andMarket PowerA. Legal and Economic FrameworkB. Market Definition215215217

Contents1. Estimating the Elasticity of Demanda. Modeling Different Types of Consumer Preferences(1) Product Space Models(2) Characteristic Space Modelsb. Applying the Elasticity of Demand to theHypothetical Monopolist Testc. Applying the Elasticity of Demand to the CriticalLoss Testd. Elasticities of Marshallian Demand and ResidualDemand2. Assessing the Relationship between Prices of CompetingProducts or Prices in Different Regionsa. Price Correlations and Other Non-Causal Approaches(1) Price Correlations(2) Price Equality Testsb. More Advanced Econometric Approaches(1) Cointegration Analyses(2) Speed of Adjustment Tests(3) Price Responsiveness Tests(4) Natural Experiments3. Analysis of Shipment DataC. Market Power1. Market Share, Concentration, and Entrya. Market Share as a Measure of Market Powerb. Constructing Market Share from Market Datac. Calculating the Herfindahl-Hirschman Indexd. Econometric Models of Market Structure and Entry2. Supracompetitive Profit Marginsa. Profit Margins as a Measure of Market Powerb. Measuring Profit Margins Using Financial andAccounting Datac. Estimating Profit Margins from the Inverse Dem

c. Reliability of Merger Simulation 276 C. Estimating the Price Effects of Proposed Transactions 277 1. Analyses of Potential Unilateral Effects 277 a. Whole Foods and Wild Oats 277 b. Hospital Mergers 281 2. Analyses of Potential Coordinated Effects 284 a. The Cruise Lines Mergers 284 b. The Australian Mortgage Market 288 c. HP-Compaq 291