Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Monday, December 15, 2008

Competition Policy and Interesting Times

Posted by D. Daniel Sokol

UK Competition Commission Chairman Peter Freeman's speech at the Competition Forum earlier this month, Competition Policy and Interesting Times, is now available.  The most important point he makes is "Credibility of competition enforcement must be maintained in the face of economic downturn. This is best achieved by a combination of soundly-reasoned, evidence-based decisions and fair process."

December 15, 2008 | Permalink | Comments (0) | TrackBack (0)

Margin Squeeze in Fixed-Network Telephony Markets – Competitive or Anticompetitive?

Posted by D. Daniel Sokol

Wolfgang Briglauer (Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR), Economics Division), Georg Götz (Justus-Liebig-University Gießen, Department of Economics), and Anton Schwarz (Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR), Economics Division) ask Margin Squeeze in Fixed-Network Telephony Markets – Competitive or Anticompetitive?

ABSTRACT: This paper looks at the effects of different forms of wholesale and retail regulation on retail competition in fixed network telephony markets. We explicitly model two asymmetries between the incumbent operator and the entrant: (i) While the incumbent has zero marginal costs, the entrant has the wholesale access charge as (positive) marginal costs; (ii) While the incumbent is setting a two-part tariff at the retail level (fixed fee and calls price), the entrant can only set a linear price for calls. Competition from other infrastructures such as mobile telephony or cable is modelled as an ‘outside opportunity’ for consumers. We find that a horizontally differentiated entrant with market power may be subject to a margin squeeze due to double marginalization but will never be completely foreclosed. Entrants without market power might be subject to a margin squeeze if the wholesale access price is set at average ! costs and competitive pressure from other infrastructures increases. We argue that a wholesale price regulation at average costs is not optimal in such a situation and discuss retail minus and deregulation as potential alternatives.

December 15, 2008 | Permalink | Comments (0) | TrackBack (0)

Optimal Auctions When a Seller is Bound to Sell to Collusive Bidders

Posted by D. Daniel Sokol

Nicolas Gruyer (LEEA (air transport economics laboratory), ENAC) considers Optimal Auctions When a Seller is Bound to Sell to Collusive Bidders in his latest working paper.

ABSTRACT: I consider optimal auctions for a seller who is bound to sell a single item to one of two potential buyers, organized in a `well-coordinated' cartel. I show that, even though the seller cannot deter collusion, he can optimally accommodate it by employing a simple mechanism which imposes an inefficient allocation on the bidders unless they pay a sufficiently high amount to avoid it.

December 15, 2008 | Permalink | Comments (0) | TrackBack (0)

Sunday, December 14, 2008

The Effects of Bank Mergers on Small Business Lending in Germany

Posted by D. Daniel Sokol

Thomas Bloch of Goethe University Frankfurt, Finance Department examines The Effects of Bank Mergers on Small Business Lending in Germany.

ABSTRACT: In this paper, we examine the impact of mergers among German savings banks on the extent to which these savings banks engage in small business lending. The ongoing consolidation in the banking industry has sparked concerns about the continuous availability of credit to small businesses which has been further fueled by empirical studies that partly confirm a reduction in small business lending in the aftermath of mergers. However, using a proprietary data set of German savings banks we find strong evidence that in Germany merging savings banks do not significantly change the extent to which they lend to small businesses compared to prior to the merger or compared to the contemporaneous lending by non-merging banks. We investigate the merger related effects on small business lending in Germany from a bank-level perspective. Furthermore, we estimate small business lending and its continuous adjustment process simulta! neously using recent General Method of Moments (GMM) techniques for panel data as proposed by Arellano and Bond (1991).

December 14, 2008 | Permalink | Comments (0) | TrackBack (0)