Estimating Overcharges in Antitrust Cases Using a Reduced-Form Approach

Posted by D. Daniel Sokol

Cartel enforcement is one of the most interesting area of antitrust.  How do we measure cartel overcharges?  James F. Nieberding of LECG offers a number of different methods in his paper Estimating Overcharges in Antitrust Cases Using a Reduced-Form Approach: Methods and Issues. 

ABSTRACT: 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.