This paper presents the Antitrust Mixed Logit Model (AMLM), a novel methodology that shows how to calibrate the parameters of a mixed-logit demand model and simulate the competitive effects of horizontal mergers. The major advantage over the simpler Logit version (the Antitrust Logit Model, ALM, developed by Werden and Froeb,1994) is flexibility, resulting in more reasonable elasticities and consequently more plausible predictions of merger effects. Moreover, unlike the econometric approaches, the AMLM shares with the ALM the attributes that are particularly appealing to antitrust agencies, given time and data constraints they usually face: low data requirement and high computational speed. The methodology is illustrated with fictitious data to compare the results with other competing models, such as ALM and PCAIDS. Additionally, the model is applied to simulate several mergers in the Brazilian airline industry, including the recent actual merger between GOL and WEBJET merger.
airline industry; mixed logit; merger simulation; competiiton policy