12:00-12:45
Simplified Estimators for Dynamic Panels with a Multi-factor Error Structure: Evidence on “Gibrat’s Law” based on the US Banking Industry
Arturas Juodis (University of Amsterdam)

This paper proposes a new methodology for estimating panel data models with a multi-factor error structure using the GMM approach. The underlying idea involves substituting the unknown factors with time-specific weighted averages of the variables included in the model. The gains of such strategy are threefold. First, the resulting estimation procedure becomes considerably simpler, since the unobserved factors are superseded with observed data. Second, given that the model is effectively parameterized in a more parsimonious way, the resulting estimators are more efficient than existing ones. Finally, the resulting moment conditions can be linearized in a straightforward way. Using simulated data we show that the performance of the proposed estimators is more than satisfactory for a wide range of specifications. The method is applied on a large sample of banks operating in the US in order to examine the empirical relevance of Gibrat’s Law of Proportionate Effect in this context.

Discussant: Rutger Teulings (University of Amsterdam)

Field: Econometrics

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12:45-13:30
Firm-specific information and explicit collusion in experimental oligopolies
Francisco Gomez (University of Amsterdam)

We experimentally study the effect of information about competitors’ actions on cartel stability and firms’ incentives to form cartels in Cournot markets. As in previous experiments, markets become very competitive when individualized information is available and subjects cannot communicate. In contrast, when communication is possible, results reverse: Markets become less competitive and cartels become more stable when individualized information is available. We also observe that the extra profits that firms obtain thanks to the possibility to communicate are higher when individualized information is present, suggesting that firms have greater incentives to form cartels.

Field: Experimental Economics & Industrial Organisation