Markets and policy — answering with evidence?
From HHI to DID — Industry & Policy Lab answers with evidence.
01 · STRUCTURE
How is the market built?
Define markets, measure concentration, assess entry.
Identify the relevant market with SSNIP-based tests and cross-price elasticity. Quantify market power with HHI, Lerner Index, and markup estimation. Detect barriers to entry and track firm entry and exit rates.
SUMMARY
Unconcentrated, competitive market
HHI 1451 · 8 entities · top entity 23% share
Entities
8
HHI
1451
CR4
64%
Top entity
Cola_A
Concentration · Revenue share
Cross-price elasticity (top 5)
| Q↓ / P→ | ColaA | ColaB | ColaC | JuiceA | LemonA |
|---|---|---|---|---|---|
| ColaA | -2.21 | -0.73 | -0.76 | -1.32 | -1.66 |
| ColaB | -2.00 | -1.08 | -1.30 | -1.52 | -1.58 |
| ColaC | -1.67 | -0.80 | -1.64 | -1.68 | -3.41 |
| JuiceA | -0.05 | -1.19 | -2.38 | -1.91 | -1.27 |
| LemonA | -0.87 | -0.78 | -1.19 | -0.87 | -1.00 |
02 · CONDUCT
How do firms behave?
Detect collusion, dominance abuse, and vertical restraints.
Screen for price parallelism and bid-rigging patterns. Quantify abuse of dominance with predatory pricing and price discrimination tests. Assess vertical integration and foreclosure risk.
SUMMARY
Substantial pricing power detected
Mean Lerner 41.0% but only 67% of firms align with demand-implied benchmark
MEAN LERNER
41.0%
22 firms
DEMAND-IMPLIED
44.5%
1/|elasticity|
AGREEMENT RATE
67%
|est−theo| <10pp
CONDUCT THETA
1.02
0=Bertrand,1=Monopoly
Estimated vs demand-implied Lerner
03 · M&A
Will this merger harm competition?
Screen, simulate, and measure merger effects.
Apply ΔHHI, UPP, and diversion ratio tests to screen merger risk. Simulate post-merger prices with Logit-Bertrand. Measure stock market and price effects with event studies and difference-in-differences.
Scale Economies
η = 1.20 > 1: cost rises slower than output. Larger firms have a cost advantage.
• α_Q = 0.834 (SE 0.013)
• η = 1/α_Q = 1.199 → IRS
• MES ≈ Q = 335 (AC = 2.18)
• R² = 0.944
α_Q
0.834
SE 0.013
η=1/α_Q
1.199
IRS
MES (Q)
335
AC = 2.18
AC_max/AC_min
1.49
cost dispersion
Average Cost Curve (Mean AC by Q-bin)
TOP GUPPI DIRECTIONS
Ranked by GUPPI = D_ij × (P_j − MC_j) / P_i
Solid bars exceed the 10% screening threshold
04 · POLICY
Did the policy work?
Causal identification — DID, RDD, IV, event study.
Estimate causal effects of regulations, subsidies, and trade policy using difference-in-differences, regression discontinuity, and instrumental variables. Measure tax pass-through and price regulation impact.
TAX / SUBSIDY PASS-THROUGH
How much of a cost change reaches price?
ρ = 1 is full pass-through; ρ < 1 means the firm absorbs part of the cost
ρ (level FE)
0.705
SE 0.018, t = 39.03
ρ (first-diff)
0.733
SE 0.057
Cumul. (0–3 lag)
0.651
long-run approx
Test ρ ≠ 1
Reject
vs full pass-through
Asymmetric Pass-Through
Separate ρ for cost increases and decreases — a gap signals "rockets and feathers"
↑ Cost up (ρ⁺)
0.705
SE 0.082 · n = 558
↓ Cost down (ρ⁻)
0.671
SE 0.298 · n = 132
ρ⁺ − ρ⁻ = 0.033 (SE 0.309, t = 0.11) · Symmetric (cannot reject)
Distributed-Lag Pass-Through
Heavy lag-0 means immediate response; spread-out coefficients mean gradual adjustment
PRICE REGULATION
Price distribution
Density histogram — the spike at the cap is the visible bunching mass
05 · IMPACT
What are the economic effects?
Productivity, dynamics, linkages, and welfare.
Measure total factor productivity with Levinsohn-Petrin. Estimate scale economies and X-inefficiency with DEA. Track firm survival and reallocation. Quantify output and employment multipliers and welfare effects.
SCALE ECONOMIES
log AC vs log Q regression
OLS slope is α_Q; if α_Q < 1, the line slopes down (IRS)
CONSUMER & PRODUCER WELFARE
Market diagram & counterfactual price shifts
Demand and supply curves with equilibrium
Counterfactual price shifts
| Price shift | P_new | Q_new | CS | PS | DWL |
|---|---|---|---|---|---|
| +5% | 52.80 | 94.90 | -244.28 | 54.78 | 5.66 |
| +10% | 55.32 | 90.40 | -477.23 | 98.23 | 22.65 |
| +20% | 60.35 | 81.39 | -909.15 | 151.14 | 90.62 |
ALL IN ONE LAB
Everything Industry & Policy Lab does.
35+ methods across structure, conduct, M&A, policy, and impact.
Market definition
SSNIP-based tests and cross-price elasticity to draw the relevant market.
Market power
HHI & concentration, Lerner index, markup, labor monopsony.
Entry & exit
Entry barriers and firm entry/exit rates.
Collusion screening
Price parallelism and bid-rigging patterns.
Abuse of dominance
Predatory pricing and price-discrimination tests.
Vertical relations
Vertical integration and foreclosure risk.
Merger screening
ΔHHI, UPP, and diversion ratios.
Merger simulation
Logit-Bertrand post-merger price simulation.
Causal identification
DID, RDD, IV, and event studies for policy effects.
Regulation impact
Tax/subsidy pass-through, price regulation, trade policy.
Productivity & dynamics
TFP (Levinsohn-Petrin), scale economies (DEA), firm survival, reallocation.
Linkages & welfare
Output/employment multipliers, consumer & producer welfare, wage premium.
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