Wednesday, January 18, 2017
Barry Hawk, Fordham describes Attempts to Monopolize --- An American Anomaly.
ABSTRACT: The attempt provision is based on the criminalization of Section 2 which is now recognized as no longer appropriate. The attempt provision fills no important gap in antitrust enforcement and generates unnecessary costs and doctrinal complexities that burden litigation.
While the attempt to monopolize provision remains, courts should discard specific intent as an element of the claim. Modern criminal law principles fail to support a specific intent requirement which is incoherent, confusing, potentially prejudicial and an unnecessary legal fiction. It erroneously suggests to the factfinder that an intention to gain monopoly power itself makes the challenged conduct an unlawful attempt to monopolize.
Specific intent aggravates the doctrinal uncertainties under section 2. The standard for attempted monopolization should correlate with the completed offense of actual monopolization: “anticompetitive” conduct plus significant but less than monopoly power market power (“dangerous probability”).
Evidence of subjective intention (state of mind) should be admissible and given probative weight only as relevant to a specific material issue such as the legitimacy of asserted business justifications or competitive effects. With elimination of specific intent as an element of the claim, evidence of intent should not be admitted unanchored to a material issue.
Antitrust Appraisal of Vertical Agreements in the ASEAN Economic Community: Proposals for a More Harmonised Approach
Alison Jones, King's College London – The Dickson Poon School of Law Antitrust offers an Appraisal of Vertical Agreements in the ASEAN Economic Community: Proposals for a More Harmonised Approach.
ABSTRACT: In spite of the ASEAN goal of harmonising national competition policies and laws, the ASEAN Member States (AMSs) adopt an array of different approaches towards a number of procedural and substantive competition law issues, including the substantive appraisal of vertical agreements. The question of whether, and if so how, analysis of vertical agreements under the competition laws of the AMSs should be aligned has, to date, received little attention from ASEAN competition agencies. This paper notes that this is, nonetheless, a matter of considerable importance. Not only do the differences in approach adopted undermine ASEAN’s stated objectives, but they are likely to be damaging competition and efficiency and inhibiting market integration.
The paper draws on practice and experience in the US and EU to consider whether, and if so how, the approach to vertical agreements under the competition law systems of the AMSs should be reformed or developed to ensure a more coherent policy which is optimal for achieving ASEAN’s objectives. One issue considered is whether the EU policy towards resale price maintenance and restraints on cross-border trade should be emulated. In particular, whether a hardline approach should be adopted against vertical restraints which enable firms to partition the ASEAN market along national lines and perpetuate price differences in the AMSs, thereby undermining its single market objective.
The paper concludes that although greater harmonisation of policies towards vertical agreements might be desirable, it will be difficult to achieve within the existing national systems without some legislative changes and significant cooperation between the ASEAN competition authorities. Given the different perspectives that the separate legislative regimes reflect, debate will be required to build consensus around a more uniform approach that can effectively be implemented within each of the national systems.
Tuesday, January 17, 2017
Ryan Hawthorne, Centre for Competition, Regulation & Economic Development (CCRED), Pamela Mondliwa, Centre for Competition, Regulation & Economic Development (CCRED), and Tamara Paremoer, Centre for Competition, Regulation & Economic Development (CCRED) identify Competition, Barriers to Entry and Inclusive Growth: Telecommunications Sector Study.
ABSTRACT: Historically South Africa has favoured incumbents/national champions over rivalry (competition) in the telecommunications sector. However, the importance of competition has become more apparent with each new development in the sector. Given the changes in this dynamic sector it is important to evaluate progress on regulating for competition and the obstacles to meaningful participating in the sector by firms. The paper assesses barriers to entry in the market for broadband and voice services in South Africa through focusing on the experiences of Dark Fibre Africa as an entrant in fibre-based broadband, members of WAPA in wireless and Cell C as a challenger in mobile. The paper draws on interviews and publically available documents and data to assess the nature and extent of barriers to entry and expansion in the telecommunications sector. The assessment considers three categories of barriers to entry namely, access to facilities, the slow pace of regulation and strategic responses by incumbent firms.
The research finds that though there has been some headway in improving competition, there is still a long way to go. The research finds that entry has a positive impact on competition outcomes and that there are benefits to regulating for competition. Following ICASA’s mobile termination rates decision, competition in prepaid voice services broke out between the mobile operators, however, own-price and cross price elasticities analysis shows that there is considerable scope the incumbent operators’ market power, including through stronger regulation of network open access conditions. The paper concludes by making recommendations on what can be done to facilitate the roll out of broadband to achieve SA Connect targets in terms of access, speed and affordability.
Franz Jurgen Sacker (Free University of Berlin) and Frank Montag (Freshfields) offer European State Aid Law A Commentary.
BOOK ABSTRACT: The regulation of State Aid belongs to the core areas of European Union law. Without the general prohibition of state subsidies to undertakings, competitiveness would be distorted and the benefits of the internal market would be put in jeopardy. This book deals systematically article-by-article with the basic principles, the proceedings, and the implementation of State Aid law as laid down in Articles 107 to 109 TFEU, as well as the general block exemptions regulation (Regulation No 800/2008) and the Council Regulation ((EC) No 659/1999) laying down detailed rules for the application of Article 93 TEC. Further, this commentary deals in detail with the rules regulating State Aid in specific sectors such as telecommunication, postal services, broadcast and television, energy/coal, banking, railroads, road transport, shipping, air traffic/airports, automotive industry, shipbuilding, steel, housing, agriculture, fishery, culture/tourism/sport and health. - See more at: http://www.bloomsburyprofessional.com/uk/european-state-aid-law-9781849461900/#sthash.cyDQAUJm.dpuf
Christopher S. Yoo, University of Pennsylvania Law School; University of Pennsylvania - Annenberg School for Communication; University of Pennsylvania - School of Engineering and Applied Science explores Open Source, Modular Platforms, and the Challenge of Fragmentation.
ABSTRACT: Open source and modular platforms represent two powerful conceptual paradigms that have fundamentally transformed the software industry. While generally regarded complementary, the freedom inherent in open source rests in uneasy tension with the strict structural requirements required by modularity theory. In particular, third party providers can produce noncompliant components, and excessive experimentation can fragment the platform in ways that reduce its economic benefits for end users and app providers and force app providers to spend resources customizing their code for each variant. The classic solutions to these problems are to rely on some form of testing to ensure that the components provided by third parties comply with a compatibility standard and to subject the overall system to some form of governance. The history of the three leading open source operating systems (Unix, Symbian, and Linux) confirms this insight. The question is thus not whether some constraints will apply, but rather how restrictive those constraints will be. Finally, the governance regimes range from very restrictive to relatively open and permissive. Competition policy authorities should take into account where certain practices fall along that spectrum when enforcing competition law. Exposing the more permissive practices to demanding scrutiny runs the risk of causing operating systems to turn to more restrictive approaches.
Joshua D. Wright, George Mason University and Douglas H. Ginsburg, U.S. Court of Appeals for the District of Columbia Circuit; George Mason University describe The FTC PAE Study: A Cautionary Tale About Making Unsupported Policy Recommendations.
Abstract: In October 2016, the Federal Trade Commission released its long awaited case study examining the business practices of 22 Patent Assertion Entities (PAEs). One clear policy implication is that PAEs do not present an antitrust problem. While the study makes a number of interesting and potentially important factual findings, it makes four policy recommendations that simply are not substantiated by anything in the study. The FTC acknowledged that the limitations of its sample rendered it inappropriate to extrapolate its findings to PAEs as a whole. Curiously, however, in spite of that acknowledgement, FTC went on to make recommendations applicable to the entire population of PAEs. Because it is unclear whether the policy recommendations in the FTC’s PAE study would survive a cost-benefit test, and because they certainly cannot be substantiated based upon the PAE Study alone, we conclude the policy recommendations should be afforded little weight.
Monday, January 16, 2017
The Perks of Being a Whistleblower: Designing Efficient Leniency Programs in New Antitrust Jurisdictions
Sandra Marco Colino, The Chinese University of Hong Kong (CUHK) describes The Perks of Being a Whistleblower: Designing Efficient Leniency Programs in New Antitrust Jurisdictions.
ABSTRACT: The proliferation of competition law has led to the emergence of a myriad of new antitrust regimes, most of which have less than 25 years of enforcement experience. Young jurisdictions display an inclination to adopt leniency programs, an investigative tool used in veteran antitrust systems which involves offering rewards to informants for their disclosure of information that serves as evidence of collusion. This paper attempts to develop a framework for effective leniency policy design in jurisdictions which have limited or no mileage enforcing antitrust laws. Such an endeavor requires the meticulous tailoring of the general principles developed in experienced regimes to address local needs. Through a solid review of legal and economic studies of leniency, and thorough comparative analysis, the article identifies a number of hurdles common in young systems that may be tackled with analogous solutions. Some issues ought to be addressed through the learning process given by the accumulation of experience, and require a methodological enforcement strategy and time. Others however might need the re-adjustment of either leniency programs themselves or the antitrust systems they help to enforce. While the latter approach is preferable, it more difficult to implement. The paper focuses on leniency design, and recommends three general strategies: rethinking the magnitude of the reward offered to amnesty applicants where penalties for collusion are modest; reducing discretion insofar as possible, to enhance transparency and predictability in the pre-enforcement experience phase; and ensuring a balance between the adequate protection of confidentiality on the one hand, and the need to foster international cooperation efforts to break cartels on the other. The proposals aim to contribute not only towards enhancing the efficiency of new antitrust systems. Importantly, “glocalized” efforts to tackle cartels create an invaluable joint deterrent effect, paramount to combatting the biggest and most harmful collusive practices.
Daryl Lim, John Marshall discusses Unilateral Conduct and Standards.
ABSTRACT: This chapter examines how antitrust law and patent law have responded to unilateral conduct by patentees in the standards context. A patentee who legitimately wins the market may improperly leverage on its monopoly power to exclude rivals. Similarly, providing the best-in-breed technology cannot excuse patentees who practice patent ambush. Deception corrupts the competitive process by which SSOs select the best-in-breed technology at a competitive price. If patentees seek to leverage on collaborative standardization, they must accept both the benefit and burdens of that process.
The Role of Market Power in Economic Growth: An Analysis of the Differences between EU and US Competition Policy Theory, Practice and Outcomes
Stephane Ciriani, ORANGE and Marc Lebourges, France Telecom analyze The Role of Market Power in Economic Growth: An Analysis of the Differences between EU and US Competition Policy Theory, Practice and Outcomes.
ABSTRACT: The European Union has experienced relatively weak economic performance over the past fifteen years, notably compared to the U.S. In order to restore investment, innovation, and therefore growth, the European Commission seeks to raise the level of static competition in all markets. The Commission’s economic policy is largely determined by its competition policy. This policy is derived from its doctrine on competition law, which regards the exercise of market power as a source of inefficiency and advocates that its effects should be banned. By contrast, the U.S. competition authorities, under the influence of the Chicago School, consider that market power is a necessary incentive to invest and a fair return on investment. Recent findings in economic growth theory, which state that increased competition intensity may harm endogenous innovation, provide a theoretical basis to support the U.S. approach and call for a review of European doctrine.
Cavid Nabiyev (Central Bank of Azerbaijan Republic), Kanan Musayev (Central Bank of Azerbaijan Republic), and Leyla Yusifzada (Central Bank of Azerbaijan Republic) explore Banking Competition and Financial Stability: Evidence from CIS Countries.
ABSTRACT: The study provides empirical analysis of the cross-country relationship between a direct measure of competitive conduct of banking system and financial system in CIS countries during the period from 2001 to 2013. We determine the level of banking competition by using Panzar and Rosse H-statistic. Estimation results from Logit probability analysis reveal that the level of competition does not significantly affect the probability of banking crisis in such countries. However, a number of macroeconomic and institutional factors have a significant influence in financial stability. According to empirical results, higher inflation increases the probability of a banking crisis. On the other hand, credit growth decreases the probability of banking crisis in the investigated countries. These results are robust to the methodology when the interaction of concentration and h-statistic is used. The institutional factors have significant influence on preventing banking crises. Specifically, improvement in government effectiveness decreases the probability of banking crisis.
Sunday, January 15, 2017
From the press release:
Justice Department and Federal Trade Commission Announce Updated International Antitrust Guidelines
The Department of Justice and the Federal Trade Commission (FTC) issued today revised Antitrust Guidelines for International Enforcement and Cooperation. These guidelines update the 1995 Antitrust Enforcement Guidelines for International Operations and provide guidance to businesses engaged in international activities on questions that concern the agencies’ international enforcement policy as well as the agencies’ related investigative tools and cooperation with foreign authorities.
The revised guidelines reflect the growing importance of antitrust enforcement in a globalized economy and the agencies’ commitment to cooperating with foreign authorities on both policy and investigative matters.
“Anticompetitive conduct that crosses borders can adversely affect our commerce with foreign nations. The department’s antitrust enforcement is focused on ending that conduct in order to protect consumers and businesses in the United States,” said Acting Assistant Attorney General Renata Hesse, in charge of the Department of Justice’s Antitrust Division. “The Antitrust Guidelines for International Enforcement and Cooperation released today provide important, up to date guidance to businesses engaged in international operations on our enforcement policies and priorities; the changes we have made to the international guidelines, last issued in 1995, reflect developments in the department’s practices and in the law over the last 22 years. Developed jointly with the FTC, the Guidelines are another powerful example of the benefits of collaboration between our Agencies.”
“The agencies’ enforcement of the U.S. antitrust laws now frequently involves activity outside the United States, increasingly requiring collaboration with international counterparts,” said Chairwoman Edith Ramirez of the FTC. “The Guidelines we are issuing today explain to the business and antitrust communities our current approaches to international enforcement policy and related investigative tools, and cooperation. They are the product of the excellent working relationship between our two agencies.”
The revisions describe the current practices and methods of analysis the agencies employ when determining whether to initiate and how to conduct investigations of, or enforcement actions against, conduct with an international dimension. The Antitrust Guidelines for International Enforcement and Cooperation are different from the 1995 guidelines in several important ways. In particular, they:
Add a chapter on international cooperation, which addresses the Agencies’ investigative tools, confidentiality safeguards, the legal basis for cooperation, types of information exchanged and waivers of confidentiality, remedies and special considerations in criminal investigations;
Update the discussion of the application of U.S. antitrust law to conduct involving foreign commerce, the Foreign Trade Antitrust Improvements Act, foreign sovereign immunity, foreign sovereign compulsion, the act of state doctrine and petitioning of sovereigns, in light of developments in both the law and the Agencies’ practice; and
Provide revised illustrative examples focused on the types of issues most commonly encountered.
The agencies issued proposed revisions for public comment on Nov. 1, 2016, in response to which comments were received from practitioners, academics, economists, and other stakeholders. Public comments are available at https://www.justice.gov/atr/guidelines-and-policy-statements-0/antitrust-guidelines-international-enforcement-and-cooperation-2017.
The Antitrust Guidelines for International Enforcement and Cooperation are available on the Department’s website at https://www.justice.gov/atr/internationalguidelines/download and the FTC’s website at www.ftc.gov/InternationalGuidelines.
The FTC vote approving the 2017 Antitrust Guidelines for International Enforcement and Cooperation was 3-0.
Friday, January 13, 2017
12th GCLC ANNUAL CONFERENCE DYNAMIC MARKETS AND DYNAMIC ENFORCEMENT: WHICH COMPETITION POLICY FOR A WORLD IN FLUX? 26-27 January 2017
12th GCLC ANNUAL CONFERENCE DYNAMIC MARKETS AND DYNAMIC ENFORCEMENT: WHICH COMPETITION POLICY FOR A WORLD IN FLUX? 26-27 January 2017
The advent of the digital revolution combined with the globalization process and, at EU level, the completion of the Single Market, have transformed the way businesses compete in today’s world. These phenomena are said to have significantly accelerated innovation cycles and the pace of change across many industries, while challenging the relevance of competition to deliver optimal welfare outcomes. Against this background, the conference will explore how competition policy has faced and accompanied the emergence of increasingly dynamic market environments and how it has developed strategies to ensure its lasting relevance both in the design of substantive principles and in enforcement practices. Likewise, it will attempt to capture how the implementation of innovative enforcement tools has affected outcomes and the evolution of the law. Associating lawyers and economists, practitioners and academics, the conference will therefore seek to assess the interplay between dynamic markets and dynamic enforcement strategies with a view to contributing to the design of an optimal competition policy for today’s world in flux.
Full program available HERE
Registration available HERE
Speakers include: Carl Baudenbacher, Jacques Bughin, Peter Camesasca, Ief Daems, Pascale Déchamps, Kris Dekeyser, Alexandre de Streel, David Evans, Damien Géradin, Thomas Graf, Mathew Heim, Pablo Ibanez-Colomo, Marc Jaeger, Thomas Janssens, Jérémie Jourdan, Wolfgang Kerber, William E. Kovacic, Johannes Laitenberger, Guillaume Loriot, Cecilio Madero, Munesh Mahtani, Philip Marsden, Massimo Merola, Bernd Meyring, Jörg Monar, Eric Morgan de Rivery, Andreas Mundt, Nicolas Petit, Etienne Pfister, Pierre Régibeau, Christine Varney, Thomas Vinje, Mike Walker
According to the press release:
DOJ and FTC Issue Updated Antitrust Guidelines for the Licensing of Intellectual Property
Update Reaffirms Role of Guidelines while Reflecting Developments in the Law
and the Agencies’ Enforcement and Policy Work
The Department of Justice and the Federal Trade Commission issued today updated Antitrust Guidelines for the Licensing of Intellectual Property (IP Licensing Guidelines) that explain how the federal antitrust agencies evaluate licensing and related activities involving patents, copyrights, trade secrets and know-how. This update modernizes the IP Licensing Guidelines, which the agencies jointly issued in 1995, so they may continue to play a fundamental role in the agencies’ analysis of the licensing of intellectual property rights and provide guidance to the public and the business community about the agencies’ enforcement approach to intellectual property licensing.
The agencies announced the proposed update of the IP Licensing Guidelines and made a draft available for public comment in August 2016. As described in that announcement, the proposed update reflected intervening changes in statutory and case law, as well as relevant enforcement and policy work, including the agencies’ 2010 Horizontal Merger Guidelines. During a 45-day comment period, the agencies received public comments from academics, private industries, law associations and non-profit organizations, which are available here. After carefully reviewing and considering the comments, the agencies have now finalized the update.
“Our modernized IP Licensing Guidelines continue to apply an effects-based analysis that puts the focus on evaluating harm to competition, not on harm to any individual competitor, and support procompetitive intellectual property licensing that can promote innovation,” said Acting Assistant Attorney General Renata Hesse of the Justice Department’s Antitrust Division. “The comments we received were helpful in completing this update and also serve more broadly to better our understanding of some of today’s very complex antitrust issues that involve intellectual property rights.”
“Today, the Commission reaffirms its commitment to an economically grounded approach to antitrust analysis of IP licensing,” said Chairwoman Edith Ramirez of the FTC. “A strong and competitive IP licensing system benefits consumers and fosters innovation, by helping to ensure that inventors realize an appropriate return on their investment.”
In response to the desire of some commenters for the guidelines to more specifically address additional IP licensing activities, the agencies reiterate that the flexible effects-based enforcement framework set forth in the IP Licensing Guidelines remains applicable to all IP licensing activities. In addition, the business community may consult the wide body of DOJ and FTC guidance available to the public – in the form of published agency reports, statements, speeches and enforcement decisions – which rely on this analytical framework and further illuminate each agency’s analysis of a variety of conduct involving intellectual property, including standards-setting activities and the assertion of standards-essential patents.
Celine Meslier-Crouzille (LAPE); Tastaftiyan Risfandy (LAPE); and Amine Tarazi (LAPE) analyze Dual Market Competition and Deposit Rate Setting in Islamic and Conventional Banks.
ABSTRACT: This paper addresses the issue of competition in dual banking markets by analyzing the determinants of deposit rates in Islamic and conventional banks. Using a sample of 20 countries with dual banking systems over the 2000-2014 period, our results show significant differences in the drivers of Islamic and conventional banks' pricing behavior. Conventional banks with stronger market power set lower deposit rates but market power is not significant for Islamic banks. In predominantly Muslim environments, conventional banks set higher deposit rates and further higher when their market power is lower. Whereas conventional banks are influenced by the competitiveness of Islamic banks, Islamic banks are only affected by their peers in predominantly Muslim countries. Our findings have important implications regarding competition and bank stability in dual banking markets.
Noriaki Matsushima and Shohei Yoshida explore The countervailing power hypothesis when dominant retailers function as sales promoters.
ABSTRACT: We consider a downstream oligopoly model with one dominant and several fringe retailers, who purchase a manufacturing product from a monopoly supplier. We then examine how the supplier's outside option influences the relation between the dominant retailer's bargaining power and the equilibrium retail price. If the market demand shrinks due to a breakdown of bargaining between the supplier and the dominant retailer, who works as a sales promoter for the product, there is a negative relation between the bargaining power and the retail price. Furthermore, retailers' efficiency improvements increase the retail price if the dominant retailer's bargaining power is strong.
Gu, Yiquan (Management School, University of Liverpool) and Wenzel, Tobias (Department of Economics, University of Bath) discuss Consumer confusion, obfuscation, and price regulation.
ABSTRACT: This paper studies firms’ obfuscation choices in a duopoly setting where two firms differ in their marginal costs of production. We show that the high-cost firm chooses maximum obfuscation while the low cost firm chooses minimal (maximal) obfuscation if the cost advantage is large (small). We argue that price regulation might be a useful policy in such an environment for two reasons: Introducing a price cap benefits consumers as it i) makes pricing more competitive and ii) reduces firms’ incentives to obfuscate. Moreover, a price cap benefits social welfare as it shifts production to the more efficient low-cost firm.
Thursday, January 12, 2017
Po-Hsin Ho (National Taipei University) has a paper on Overconfident CEOs, product market competition, and corporate investment decisions.
ABSTRACT: This study further investigates the corporate investment decisions made by overconfident CEOs. The effect of overconfident CEOs on corporate investment decisions is widely examined in recent literature (Malmendier and Tate, 2005, 2008; Hirshleifer, Low, and Teoh, 2012; Chen, Ho and Ho, 2014; Ferris, Jayaraman, and Sabberwa, 2013; Kolasinski and Li, 2013). The literature indicates that overconfident CEOs overinvest. In a recent article, Kolasinski and Li (2013) find well governed firms could mitigate the overinvestment problem caused by overconfident CEOs. However, the literature ignores the role of product market competition in corporate investment decisions. Giround and Mueller (2010, 2011) find that competitive industries can substitute corporate governance to force managers to work hard. This study thus examines the influence of market competition on managerial overconfidence and reexamines the investment-cash sensitivity and merger activities of overconfident CEOs. We propose two competing hypotheses to study whether the investment behavior of overconfident CEOs differs under different competition structures. Our findings suggest that intense market competition mitigates the overinvestment and merger tendency of overconfident CEOs.
Ifrach, Bar (Airbnb) and Weintraub, Gabriel Y. (Columbia University) offer A Framework for Dynamic Oligopoly in Concentrated Industries.
ABSTRACT: In this paper we introduce a new computationally tractable framework for Ericson and Pakes (1995)-style dynamic oligopoly models that overcomes the computational complexity involved in computing Markov perfect equilibrium (MPE). First, we define a new equilibrium concept that we call momentbased Markov equilibrium (MME), in which firms keep track of their own state, the detailed state of dominant firms, and few moments of the distribution of fringe firms' states. Second, we provide guidelines to use MME in applied work and illustrate with an application how it can endogenize the market structure in a dynamic industry model even with hundreds of firms. Third, we develop a series of results that provide support for using MME as an approximation. We present numerical experiments showing that MME approximates MPE for important classes of models. Then, we introduce novel unilateral deviation error bounds that can be used to test the accuracy of MME as an approximation in large-scale settings. Overall, our new framework opens the door to study novel issues in industry dynamics.
Alexandre CROUTZET ; Pierre LASSERRE examine Optimal Completeness of Property Rights on Renewable Resources in Presence of Market Power.
ABSTRACT: There are many instances where property rights are imperfectly defined, incomplete, or imperfectly enforced. The purpose of this normative paper is to address the following question:are there conditions under which partial property rights are economically efficient in a renewable resource economy? To address this question, we treat the level of completeness of property rights as a continuous variable in a renewable resource economy. By design, property rights restrict access to the resource, so that they may allow a limited number of firms to exercise market power. We show that there exists a level of property rights completeness that leads to first-best resource exploitation; this level is different from either absent or complete property rights. Complete rights are neither necessary nor sufficient for efficiency in presence of market power. We derive an analytic expression for the optimal level of property rights completeness and discuss its policy relevance and information requirements. The optimal level depends on i) the number of firms; ii) the elasticity of input productivity and iii) the price elasticity of market demand. We also find that a greater difference between the respective values of input and output requires stronger property rights. In fact, high profits both imply a severe potential commons problem and may be the expression of market power; strong property rights limit the commons problem; their incompleteness offsets market power. Biology also impacts the optimal quality of property rights: when the stock of resource is more sensitive to harvesting efforts, optimal property rights need to be more complete.
E. Bacchiega; O. Bonroy; and E. Petrakis offer Contract contingency in vertically related markets.
ABSTRACT: We study the optimal contract choice of an upstream monopolist producing an essential input that may sell to two vertically differentiated downstream firms. The upstream supplier can offer an exclusive contract to one of the firms or non-exclusive contracts to both firms. Each of the latter can be made contingent or not on the breakdown of the negotiations between the upstream supplier and the rival downstream firm. The distribution of bargaining power during the contract terms negotiations is the main driving force of the monopolist's choices. A powerful supplier always opts for an exclusive contract. By contrast, a weaker supplier offers non-exclusive contracts and makes each of them contingent or non-contingent such as to guarantee the most favorable outside option in its negotiations. Our main results hold under an horizontally differentiated downstream market too.