Matthew Backus, Associate Professor, Columbia Business School
Models of firm conduct are the cornerstone of both theoretical and empirical work in industrial organisation. A recent contribution (Berry and Haile, 2014) has suggested the use of exclusion restrictions to test alternative conduct models. We propose a pairwise testing procedure based on this idea and show that the power of the test to discriminate between models is tied to the formulation of those restrictions as moments and how they reflect the nonlinearity of equilibrium markups. We apply this test to the ready to eat cereal market using detailed scanner and consumer data to evaluate the “common ownership” hypothesis, which has received significant attention. Although we show that the potential magnitude of common ownership effects would be large, our test finds that standard own firm profit maximisation is more consistent with the data.
Speaker bio
Matthew Backus is an empirical industrial organisation economist with broad interests. Themes in his research include auctions, bargaining, productivity, online markets, inequality, and communication. Perhaps the most central and consistent element is his interest in antitrust economics, at the interface of data, economic theory, and policy.
Matthew is the Philip H. Geier Jr. associate professor in the economics division of Columbia Business School. He is also a faculty research fellow of the industrial organisation program at the National Bureau of Economic Research, and a research affiliate of the industrial organisation programme of the Centre for Economic Policy Research. He has a PhD in economics from the University of Michigan at Ann Arbor.
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