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Academic Articles Awards > Economics

Average overcharge models and determining individual harm in collective actions

Pierre Cremieux, Mark Lewis, and Dov Rothman, Concurrences N° 2, pp. 38-44, 2015

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We consider what can be inferred from an average overcharge model about individual harm in collective actions. We show that the percentage of claimants for which such inference is possible depends on the average overcharge model’s explanatory power at the claimant level and the size of the average overcharge. Inference is possible for a larger percentage of claimants when the average overcharge model has more explanatory power, and when the average overcharge is larger, all else equal. Our findings have important takeaways for jurisdictions that allow individuals to pursue claims for harm as part of collective actions. One, our analysis shows that accurate estimation of the average overcharge is highly relevant to what can be inferred about individual harm. If the average overcharge model overestimates the average overcharge, the ability to make inferences about individual harm based on the average overcharge model will be overstated. Two, while the statistical significance of the average overcharge estimate is often considered a proxy for the fact of harm to individual members of the class, our analysis shows that the model’s overall explanatory power is a more important determinant of the relevance of an average overcharge to any given individual claimants.

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