Matt Backus (Columbia University)
Kalai Family Workshop in Econometrics
Apr 23 2018
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Competition and Common Ownership in the Ready-to-Eat Cereal Industry
Publicly-traded firms have a fiduciary duty to shareholders, which motivates the assumption of firm-level profit maximization. However, if those shareholders have an interest in competitors, the assumption might be misguided. We investigate this concern in the ready-to-eat cereal industry using matched product-market data and owner- ship data. We estimate a structural model of demand and pricing that nests alternative objective functions in order to evaluate their empirical content and implications for costs and margins over time and merger simulation.