DP16900 A Practical Review of Methods to Estimate Overcharges Using Linear Regression

Author(s): Roman Inderst, Christopher Milde
Publication Date: January 2022
Keyword(s): damages quantification, dummy variable, Forecasting, interaction model, interactions, overcharge estimation, Treatment effects
JEL(s): C20, K13
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16900

Arguably the most widely used techniques for estimating price overcharges from competition law infringements are the dummy variable and the forecasting approaches using linear regression analysis. While rarely used in practice, in this note we make use of the fully interacted dummy variable approach to review some basic properties of all three approaches. We show under which conditions and for which estimands of interest these approaches are equivalent and when they differ. We also note some interesting additional choices an interaction approach allows.