Merger simulation with nested logit demand

In this article, we show how to implement merger simulation in Stata as a postestimation command, that is, after estimating an aggregate nested logit demand system with a linear regression model. We also show how to implement merger simulation when the demand parameters are not estimated but instead calibrated to be consistent with outside information on average price elasticities and profit margins. We allow for a variety of extensions, including the role of (marginal) cost savings, remedies (divestiture), and conduct different from Bertrand–Nash behavior.