Law360 (January 21, 2020, 6:03 PM EST) — Economists generally cannot conduct randomized controlled experiments — like those done to test the efficacy of a new drug — to analyze the effects of a given event on market outcomes. They can, however, observe and study the effects of natural experiments, such as unexpected plant outages, natural disasters, the entry/exit of key competitors or a change in the economic/regulatory environment.
A 2018 article in Law360 provided an overview of how such natural experiments might be used to estimate economic damages in a difference-in-differences framework (though this technique was never specifically mentioned).[1]
This article provides a more detailed discussion of the DiD…
