Estimating Overcharges in Antitrust Cases Using a Reduced-Form Approach : Methods and Issues

This paper presents several methods and discusses salient issues pertaining to the use of reduced-form models to estimate overcharges in antitrust matters (e.g., price-fixing) where but-for prices may be less than actual prices during the anticompetitive period. In particular, two common types of reduced-form estimations are discussed: the dummy variable approach and the forecasting approach. Under either methodology, an error correction model is then specified as one way to address technical problems often found in applied time-series analysis - nonstationary data and the existence of short-term and longterm dynamics