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The Perils of Antitrust Econometrics: Unrealistic Engel Curves, Inadequate Data, and Aggregation Bias

Gabriel Lozada ()
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Gabriel Lozada: University of Utah

No inetwp203, Working Papers Series from Institute for New Economic Thinking

Abstract: Some economists argue antitrust policy should be based on empirical methods used by the Industrial Organization subdiscipline of economics, but non-economists must understand that those methods contain certain highly restrictive assumptions. Those assumptions involve econometric "identification," and treating aggregate demand as if it were generated by a representative consumer (Muellbauer's "generalized linear" preferences). We derive new results illustrating how restrictive the representative consumer assumption is; we explain aggregation bias in Almost Ideal Demand System models; and we show that data limitations make it even harder to justify economists' restricting aggregate demands as one would the demand of a single individual.

Keywords: Antitrust econometrics; Almost Ideal Demand System (AIDS); New Brandeis School (search for similar items in EconPapers)
JEL-codes: C43 C54 D12 L4 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2023-03-29
New Economics Papers: this item is included in nep-com, nep-hpe and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:inetwp203

DOI: 10.36687/inetwp203

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