Economics – Overview (Measurement-Error Bias in Overcharge Calculations)
Global Competition Review: Europe, Middle East and Africa Antitrust Review 2021, July 2020
Every year, Global Competition Review (GCR) publishes a series of reports offering detailed information and analysis to agencies and practitioners engaged in antitrust and competition work throughout the world. GCR’s Europe, Middle East and Africa Antitrust Review 2021 includes an article written by Analysis Group Principal Mark Lewis and Vice President Rebecca Scott.
In their article, Dr. Lewis and Dr. Scott discuss a common data limitation that can cause standard methods to misestimate the effect of anticompetitive conduct on prices, and even to find “phantom overcharges” where no overcharges exist. In cases alleging that prices have been inflated by anticompetitive conduct, they explain, overcharges are often assessed by comparing prices during the alleged conduct period to prices before or afterward, while controlling for other factors that influence price using a multivariate regression model. If a control variable in that model trends over time and is measured imperfectly, as is often the case for cost, then the multivariate regression method may produce a biased estimate of overcharges. Dr. Lewis and Dr. Scott explain the statistics underlying measurement-error bias and discuss methods to detect and mitigate the problem.
“Economics: Overview: Measurement-Error Bias in Overcharge Calculations” is an extract from GCR’s Europe, Middle East and Africa Antitrust Review 2021, first published in July 2020.