The Difference-In-Differences Approach to the Estimation of Cartel Damage

03 June 2019
Prof. Dr. Frank Maier-Rigaud and Dr. Slobodan Sudaric

Competition economists apply a variety of methods for estimating counterfactual prices in cartel damage claims. Among the most widely used approaches generally recognized by competition authorities are comparator-based methods. These methods rest on the assumption that by comparing the cartelized market to a similar market, the cartel overcharge can be precisely identified if all other differences between the two markets are being controlled. The market being compared may either be a comparable geographic or product market, the cartelized market itself at a different point in time (either before or after the cartel period), or a combination of the two – the so-called Difference-in-Differences approach (DiD).

In this article, published in the June 2019 edition of the CPI Antitrust Chronicle, NERA Managing Director Prof. Dr. Frank Maier-Rigaud, and Economic Analyst Dr. Slobodan Sudaric show that the DiD approach is not generally superior to other methods, but that its superiority in individual cases is due to specific circumstances and data conditions that are not generally present.

An excerpted chapter is posted here with permission of Competition Policy International, Inc. (CPI).