Estimating Discrete Games with Many Firms and Many Decisions: An Application to Merger and Product Variety

Ying Fan and Chenyu Yang

No 18199, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper presents an estimation method scalable to discrete games with many firms and many decisions. The method is applied to study merger effects on firm entry and product variety in the California retail craft beer market. Simulation results indicate that a merger, where a large brewery acquires several craft breweries, reduces product variety without efficiency gains, but increases variety with an efficiency in reducing fixed costs. Post-merger, firm entry occurs, but fails to counteract the merger’s negative effects on both consumers and total surplus. The fixed cost merger efficiency reduces, but does not reverse, the negative welfare effects.

Keywords: discrete games; incomplete models (search for similar items in EconPapers)
JEL-codes: D43 L13 L41 L66 (search for similar items in EconPapers)
Date: 2023-06
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Related works:
Journal Article: Estimating Discrete Games with Many Firms and Many Decisions: An Application to Merger and Product Variety (2025)
Working Paper: Estimating Discrete Games with Many Firms and Many Decisions: An Application to Merger and Product Variety (2022)
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